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with inflationYour SIP might grow - but does it beat inflation? This calculator shows your real, inflation-adjusted returns so you know exactly what your future money is worth today.
written by
ridhima gandhi
reviewed by
shraddha joshi
home > calculators > sip calculator with inflation
Your SIP might grow - but does it beat inflation? This calculator shows your real, inflation-adjusted returns so you know exactly what your future money is worth today.
written by
ridhima gandhi
reviewed by
shraddha joshi
50 lakhs in the future won't hold the same value as they do at present.
Price levels change. Purchasing power drops. And, so the returns from your SIPs.
Why? Inflation! Therefore, you need an SIP calculator with inflation. That does not simply tell you about your future money, but about the worth of the future money.
The SIP return consists of two parts.
The return you see (on paper)
This is the number shown by most calculators: Money invested + Growth earned. Looks perfect. And one is easily led to believe that this is the end result.
The return that actually matters (real value)
This is where most people miss the point. Prices will keep rising over time — gradually but steadily:
This means that even if the SIP is raised nominally, its real value falls over time. In other words, whatever amount we receive in the future will have less value than what we have now.
What this calculator helps you see?
It gives you the total return adjusted for inflation. Therefore, the calculator makes your planning more realistic. So you don't just plan on numbers. You plan on the true value of that investment in the future.
Inflation refers to an increase in prices over time. Whereby something that currently costs ₹100 will cost even more in the future, which essentially translates to your money gradually losing its purchasing power.
On one hand, your SIP makes your money grow, and on the other hand, inflation gradually lowers the purchasing power of that money.
This is why you must factor inflation into your SIP. Since it's not only important to consider how large your investment grows, but also its real worth when you actually need it. If you don't consider inflation while calculating your SIP, even a high number may fail to meet your actual financial target.
Nominal return refers to the overall growth experienced by your SIP without taking into account inflation. For instance, your SIP portfolio increases from ₹10 lakh to ₹18 lakh without taking into consideration – the inflation. Then your net gain of ₹8 lakh will be your nominal rate of return.
However, there's more to it. As you know, inflation keeps growing, and the price of items such as rent, travel, medical costs, and education keep increasing year after year. Therefore, when your portfolio grows to 18 lakhs, its purchasing power will not be equal to what it is today.
And that's what the real rate of return means. It adjusts your return with the expected inflation rate for that period.
Simply put: Nominal return measures the amount of growth in your investment. Real return measures the actual value of your investment after inflation.
Calculating the real return on SIPs via the inflation calculator is easy. It's all about checking two factors at one go – Your SIP growth potential, And its real value in the coming years.
Step 1: Input your monthly SIP investment amount
Input the amount of money you wish to invest on a monthly basis. The calculator utilises this for projecting your future investment value.
Step 2: Decide your investment duration
Choose the tenure for which you plan to stay invested. This is important since SIP investments need adequate time to compound properly.
Step 3: Add expected return rate
It is the yearly expected return you can make from your SIP in the long run. For equity mutual funds, one usually assumes the expected rate of return is between 10%-12%.
Step 4: Enter the inflation rate
This is the additional step that makes all the difference. Your future value is calculated on the basis of increasing prices over time.
Step 5: Compare both results
In general, the calculator displays:
By looking at both values, you get a clear understanding of your portfolio's real value in the future.
Predicting accurate inflation numbers is not essential in order to make your SIP decisions better.
For rough estimates, many investors usually consider inflation ranging from 5%-6% in India.
If you want to be more conservative, you can take the inflation figure to be slightly higher. This will provide an extra buffer in your calculations. This isn't about getting the math right. It's about creating a realistic foundation for future expenses.
The biggest mistake in long-term investments is making plans for future requirements based on present-day values. Because your future goals will not remain financially constant through time.
Life plans, education goals, retirement funds, or future needs are always going to be higher in price in the future because of inflation.
This has a direct impact on SIP planning. So when you plan an SIP like "I need Rs. 50 Lakh in the future" The more relevant question becomes: "Will Rs. 50 Lakh be sufficient in the future?"
This is why inflation changes the way savvy investors plan:
A SIP objective may seem very appropriate and yet fail to cut the mustard because of inflation being overlooked. That is why inflation-adjusted planning becomes significant since it ensures that the value of your future funds remains relevant.
Inflation continues to make everything costly. The role of the SIP is to ensure that you invest enough and earn an adequate return to beat inflation in the long run. Here is how:
The objective is simple: Your money needs to appreciate faster than the inflation rate increases. Only then does your investment start yielding returns on wealth.
While a regular SIP calculator indicates growth, A SIP calculator that takes into account inflation depicts reality.
The reason is quite obvious. Investing isn't simply about making more money. It's all about growing your purchasing power even after accounting for the time value of money.
Begin early. Be consistent. Be patient to grow wealth over time.
No. It doesn't indicate that your SIP is underperforming. All it indicates is that the cost of living is increasing gradually. A SIP can be said to be underperforming when it fails to grow at a faster pace than the rate of inflation in the long run.
Not necessarily. The adjusted return is generally less than the nominal return, but sometimes it could even be more than the nominal return when there is deflation (i.e., a reduction in price levels) or zero inflation in the economy.
Any changes in inflation rates affect the actual value of your returns. An increase in the inflation rate decreases your purchasing power, whereas a decrease increases your returns' strength.
Yes, in many instances. Increasing your SIP, along with the increase in your income, will ensure that your SIP keeps up with increasing cost burdens in the future.
An annual review is generally suitable for most people. It allows you to ensure that the SIP investment remains appropriate to match future objectives and escalating costs.
When there is a sudden increase in inflation, the SIP goes on the same way; however, the future worth of your money seems to lose its value in practicality.
Inflation impacts the SIP as well as lumpsum investment schemes equally through depreciation of their value, although their mechanisms are different.
Inflation is estimated to increase by more than twice in FY27 from 2.1% to 4.9%, owing to elevated crude oil costs and food inflation, besides political tensions.
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