What It Means
Future Value (FV) is what an amount invested today will grow to by a specific date in the future, assuming a certain rate of return along the way. It's the number a compounding calculation actually solves for, the answer, not the formula itself.
How It Works
For a single lumpsum investment, Future Value grows using the same compounding logic every year: this year's value earns a return, and next year's calculation starts from that new, larger number.
FV = P × (1+r)^n
- P
- The amount invested today (the present value)
- r
- Assumed rate of return per period
- n
- Number of periods (usually years) the money stays invested
- FV
- What that amount grows to by the end
A SIP uses a related but slightly longer version of this same formula, since it accounts for a fresh instalment arriving every month instead of one lumpsum going in on day one.
Example
Invest ₹50,000 today at an assumed 8% annual return. Three years later, its Future Value is about ₹62,986. That's ₹50,000 (what you put in) plus roughly ₹12,986 (what compounding added along the way).
Warning
Future Value is only ever an estimate built on an assumed rate of return, never a guarantee. Change the assumed return even slightly and the FV changes with it. Treat any FV figure as "here's what happens if this return holds," not as a promised outcome.