The calculation, and what it hides
Enter a monthly instalment, an expected rate and a period. The calculator compounds the series and shows the invested amount against the estimated return.
It produces one smooth number. Real returns are not smooth, and for one category in particular the gap between the smooth line and the actual path is the thing you need to plan around.
Mid and small caps: the path matters as much as the destination
A smaller company can grow faster than a large one. It can also fall a long way. Broad small-cap indices in India have fallen by half in a bad period and taken several years to recover. Mid caps are less extreme but behave in the same direction.
A calculator that compounds 14% a year quietly implies the balance rises every year. It will not. A realistic path for a small-cap SIP includes stretches where the portfolio is worth less than you have paid into it — sometimes for a year or more.
This is the single most important thing to understand before starting one, because the risk is not mathematical, it is behavioural. The investor who stops the SIP during a drawdown converts a temporary fall into a permanent loss. The investor who keeps paying buys units cheaply and recovers faster.
Why a SIP suits volatile categories specifically
Rupee cost averaging does more work the more prices move.
In a flat market, averaging achieves almost nothing — every instalment buys at roughly the same price. In a volatile one, the same instalment buys many more units at the lows and fewer at the highs, and the average cost ends up below the average price over the period.
So a SIP is better suited to a small-cap scheme than to a liquid fund, even though the small-cap scheme is riskier. The volatility that makes it uncomfortable is the same volatility that makes the averaging worth having.
Horizon is not negotiable here
For a mid or small-cap SIP, a short horizon is not a smaller version of a long one — it is a different proposition. Ten years or more gives the category time to go through a full cycle. Three years may simply hand you one half of it.
If the money is needed at a specific date, shift it towards something stable as the date approaches. The alternative is finding out what the market is doing in the month you need to redeem.
How to use this calculator
- Enter the monthly investment.
- Set an expected return rate for the category. Mid and small caps justify a higher figure than large caps, but if you type in something close to a recent boom you are projecting a boom.
- Set a time period that matches the category. For small caps, long.
Then run the same inputs at a materially lower rate and sit with that result too. The honest expectation lies somewhere in the range, not at the top of it.
Costs and tax
The output is before the expense ratio, before any exit load on redemption inside a year, and before capital gains tax. Equity gains above ₹1.25 lakh in a financial year are taxable, and each SIP instalment has its own holding period.