investment · 2 min read · India
Why two SIP calculators give you different answers
On ₹10,000 a month for ten years at 12%, the two conventions in common use give ₹23,23,391 and ₹23,00,387. The gap of ₹23,004 is one extra month of compounding on every instalment, and it comes from whether the calculator assumes you invest at the start of the month or at the end.
You put the same three numbers into two SIP calculators. Ten thousand a month, twelve percent, ten years. One says ₹23.23 lakh and the other says ₹23.00 lakh. Twenty-three thousand rupees apart, on inputs that could not be simpler. It is the sort of discrepancy that makes people distrust every calculator they have ever used, and the explanation is duller and more interesting than a bug.
Both are right. They are answering different questions
A SIP is a series of equal payments. The formula that values such a series has two forms, and they differ only in when the payment lands. An ordinary annuity assumes each instalment arrives at the end of its period. An annuity due assumes it arrives at the start. Every instalment in an annuity due therefore earns one extra month of return, and multiplied across a hundred and twenty instalments that is where the twenty-three thousand comes from.
| Convention | Assumes | Maturity value |
|---|---|---|
| Annuity due | You invest on the 1st, at the start of the month | ₹23,23,391 |
| Ordinary annuity | You invest on the 30th, at the end of the month | ₹23,00,387 |
| Difference | One extra month of return per instalment | ₹23,004 |
Neither convention is more correct in the abstract. Which one matches your reality depends on your mandate date, and almost every real SIP debits early in the month, which makes annuity due the closer description for most people. What is not defensible is a calculator that picks one and never says which.
How to tell which one you are looking at
- Run ₹10,000 a month for ten years at 12%. If the answer is close to ₹23.2 lakh it is using annuity due; close to ₹23.0 lakh and it is using an ordinary annuity.
- Look for a "start of period" or "end of period" toggle. A calculator that has one has thought about this.
- Check whether the difference is even disclosed. Most fund house calculators do not state their convention anywhere.
The gap widens with time and with the rate. Over twenty years at 12% the same convention difference is worth about ₹99,000, which is no longer a rounding error on anyone's plan.
The part that actually matters
A twenty-three thousand rupee gap on a twenty-three lakh projection is one percent. The assumed return is doing far more work than the convention is: change twelve percent to eleven and the same SIP lands at about ₹21.9 lakh, a difference of ₹1.33 lakh. The convention is worth understanding because it explains why two tools disagree, not because it changes what you should expect. What changes what you should expect is the return, and nobody knows that number in advance.