Notice: CHECK FACTS BEFORE PUBLISHING — Standard actuarial compound interest formulas
Published by Learntrix··5 min read
How Mutual Fund SIP Compounding Works
SIP utilizes the Annuity Due formula, where each monthly installment compounds for its specific remaining duration in the investment timeline.
1. SIP Annuity Due Formula
Unlike a lump-sum investment where a single amount compounds for N years, an SIP deposits P at regular intervals:
M = P × [((1 + i)ⁿ - 1) ÷ i] × (1 + i)
Where M is Maturity amount, P is Monthly deposit, i is Periodic monthly interest rate (r / 12), and n is Total number of months.