Rigorous Math

Calculator Methodology

The mathematical compounding formulas and benchmarking indexes powering InvestKit.

1. Systematic Investment Plan (SIP) Compounding Formula

The standard SIP future value formula calculates compounding monthly:

FV = P × [((1 + i)^n - 1) / i] × (1 + i)

Where:
• FV = Future Value of investment portfolio.
• P = Monthly investment amount.
• i = Monthly interest rate = (Annual expected return / 12) / 100.
• n = Number of investment months = Years × 12.

2. Reverse-SIP Goal Planning Formula

To determine the required monthly payment to achieve a target goal, we solve for P:

P = FV_target × [i / ((1 + i)^n - 1)] × [1 / (1 + i)]

3. Inflation-Adjusted Future Value Formula

To preserve purchasing power, target goals in the future are adjusted upward to reflect inflation rates:

FV_target = PV_today × (1 + r_inflation)^years

Where:
• PV_today= Target value in today's purchasing power.
• r_inflation = Expected annual inflation rate (%).

4. FIRE Safe Withdrawal Rate (SWR) Calculation

The target early retirement corpus (FIRE Number) is computed as annual expenses divided by SWR:

FIRE Corpus = (Monthly Expenses × 12) ÷ (SWR / 100)

Where:
• SWR = Safe Withdrawal Rate. For standard US portfolios, SWR is 4%. For Indian portfolios facing higher CPI inflation cycles, a conservative SWR range of 3.0% to 3.5% is recommended to protect capital longevity.

5. Official Data Benchmarking Sources

We do not use random return or inflation numbers. Default parameters and ranges are sourced from official databases:

  • Reserve Bank of India (RBI): Historical Consumer Price Index (CPI) datasets are reviewed annually to determine long-term inflation defaults (currently anchored at 5.0% - 6.5%).
  • National Stock Exchange of India (NSE): Historical trailingCAGR sheets for the Nifty 50 Index (last 20 years, 2004–2024) are used to justify our 11% - 13% long-term equity growth defaults.
  • Association of Mutual Funds in India (AMFI): Industry-wide mutual fund performance matrices and fee limits are monitored to keep expense ratio comparisons accurate.