About Inflation Adjusted SIP Calculator

If you live in India and are an investor, you are likely familiar with Systematic Investment Plans (SIPs). SIPs are a great way to build wealth over long periods of time, most definitely you already know that. But there is a key element of your investments that is commonly overlooked and could be destroying your overall returns, and that is inflation. Your SIP investments might be giving you amazing nominal returns but if inflation and rising prices are not taken into consideration the real value of your investment can deteriorate significantly. At PaisaForever, we are excited to announce that we have launched our own ‘Inflation Adjusted SIP Calculator’ that we think will be invaluable for every Indian attempting to create their own financially secure future.

Most SIP calculators only show you what the ‘future value’ of your investments will be without taking into account what your money will actually buy you in the future. For example, you could attain a crore rupee amount in the next 20 years and that sounds awesome, but if inflation is undefeated at 6% per year then it’s an entirely different story in real terms. The Inflation Adjusted SIP Calculator will help you recognize this critical difference so that you can set realistic financial goals and modify your investing strategy accordingly.

This tool allows you to see the real growth of your wealth. By entering your desired SIP amount, investment period, expected rate of return, and the current or expected inflation rate, you can see the “real” value of your future corpus. This allows you to know whether you will have enough savings for major life events like retirement, children’s education, or purchasing their first home, after accounting for inflation.

Investing without thinking about inflation is like running a race where the finish line keeps moving further away from you. Our calculator allows you to stay ahead of the changes, so you can see what will be needed to reach your financial aspirations when costs are always rising. Make informed decisions and to keep your hard-earned money from going the way of inflation with PaisaForever’s Inflation Adjusted SIP Calculator.

Frequently Asked Questions (FAQs) about Inflation and Inflation-Adjusted SIPs

1. What is inflation and why is it important for Indian investors?

Inflation is the rate at which the prices of goods and services are increasing and hence the purchasing ability of money is going down. For investors, it matters because it destroys the real value of their investments and savings. If your investments don’t grow at a rate that is higher than inflation, you are losing money, as real value means that you can buy less goods and services in the future with the same amount. 

Read : India’s Inflation Rate YoY

2. How does inflation impact my SIP return? 

SIPs can generate nominal returns that are decent in reality but inflation decreases those returns. For example, if your SIP is generating a return of 10% and inflation is 6%, then you are left with a real return of only 4%. So realistically you are only adding 4% in your future spending power, but the investment is still showing 10 % growth. 

3. What is an “Inflation Adjusted SIP” or “Real Return”?  

An “Inflation Adjusted SIP” isn’t a different type of SIP product but rather a way of calculating your SIP’s future value after accounting for inflation. The “real return” is the actual return on your investment after deducting the inflation rate. It shows you the true growth in your purchasing power.

4. Why should I use an Inflation Adjusted SIP Calculator?  

An Inflation Adjusted SIP Calculator is also important for realistic financial planning, and it supports you in:

• Understanding the true value of your future corpus.
• Setting realistic financial goals based on the assumption of inflation.
• Determining whether your existing SIP contribution levels are adequate enough to provide for your long-term needs after inflation is considered.
• Taking the appropriate actions to adjust your investment strategy (i.e. increase SIP level contributions or invest in funds with a better potential for growth) if you are only achieving nominal returns that are lower than inflation rates.

5. What is the typical inflation rate in India to consider for long-term financial planning?

Inflation is always changing and can’t be viewed in a historical context; however, Consumer Price Index (CPI) inflation in India has averaged 5-6% over the last ten years.  When planning for the long term, it is prudent to use a reasonable inflation rate (5-7%) as a hedge against any amount of shortfall(whatever your purpose).

6. How do you calculate the real return? 

Formula: Real Return ≈ Nominal Return – Inflation 

Example: If your SIP has given you a nominal return of 12% and inflation is 6%, your real return would be approximately 12% – 6% = 6%. 

(For your information, real return is corrected for inflation using [(1+ nominal return)/(1+ inflation)]-1).

7.  Can SIPs beat inflation in the long term? 

Over the long-term (ideally 8–10 years or longer), equity-oriented mutual fund (SIPs in particular) historically deliver returns that exceed inflation. The main reason is the benefit of compounding and ability to grow as businesses over time. There are no guarantees, and short-term volatility can affect returns. 

8. What is a “Step-Up SIP” and how does it help combat inflation?

A Step-Up SIP (or Top-Up SIP) allows you to increase your SIP amount by fixed amount or fixed percentage on regular intervals (usually once per year). This can be a very effective method of offsetting inflation as it helps align your increasing investment with increasing prices and your increasing income, since it helps your corpus grow faster to maintain its real value.

9. How frequently should I review my SIPs with regard to inflation?

As a rule of thumb, it’s wise to review your SIPs and your financial goals, at a minimum, on an annual basis or truly whenever you make significant changes to your income, expenses, or inflation. You can use this as an opportunity to reconsider whether or not your current strategy would still achieve your specific inflation-adjusted goals. 

10. What are some other ways, besides using an Inflation Adjusted SIP Calculator, that I can tackle inflation? 

• Invest in equities: Traditionally, equities have been good inflation hedges in the long run. 
• Diversify your entire portfolio: Spread your investment across multiple asset classes such as real estate, gold, and equity as a risk mitigation strategy. 
• Consider investing in inflation-protected assets: While not viable for retail investors in India, some assets are made to protect against inflation. 
• Increase your savings rate: Try to increase your SIP payments based on your income during this time and as your income increases, so your SIP contributions should also be above the rate of inflation.

11. Is the PaisaForever Inflation Adjusted SIP Calculator easy to use?

Yes, our calculator is designed for simplicity and ease of use. You simply input a few key figures, and it provides instant, clear results showing the real value of your investments, helping you make smarter financial decisions without complex calculations.

Disclaimer: This calculator is for informational purposes only. Actual returns may vary. Always consult a financial advisor before investing.