You can calculate your estimated returns on Systematic Investment Plans (SIPs) using a Systematic Investment Plan (SIP) Calculator available online. By using a SIP calculator, you can determine how much you should invest to reach your goals.
Several factors, including expense ratios of mutual fund schemes, aren’t taken into account by this online tool as it calculates the actual returns. Investing in SIP requires careful planning, so use a SIP calculator if you’re considering it.
Read on to learn how a SIP investment calculator works!
SIP Calculator: What Does It Do?
Based on the compound interest formula, a mutual fund SIP return calculator has been developed. Take a look at this formula to understand how it works:
A = P [{(1+i)^n-1} ÷ i] x (1+i)
Here,
The future value of the portfolio at the end of the investment tenure is referred to as A.
An investment at fixed intervals is called P
Interest rate compounded by i
Investment tenure (in months) = n
Here’s an example:
The expected rate of return for an individual investing Rs. 2,500 every month for 3 years is 15%.
This yields i equal to 15 ÷ 100 ÷ 15 = 0.01
This formula results in a future value of Rs. 1,14,199. Investing Rs. 90,000 over 36 months will yield a total return of Rs. 24,199.
How the SIP Investment Calculator Can Benefit You?
The following are some advantages of using a systematic investment plan calculator:
- Provides financial planning assistance: Based on your financial goals and time horizon, helps you plan your investments
- Time-saving: When investors enter the required values, accurate results are displayed quickly. Individuals can thus save time by using this financial tool instead of manually calculating estimated returns.
- Interface with lucidity: To calculate the estimated returns on your SIP investment, you only need to enter a few details.
- In order to understand the concept of a systematic investment plan, you must first understand how a mutual fund SIP calculator works.
In Simple Terms, What is SIP?
In systematic investment plans, investors invest a set amount of money periodically (monthly, quarterly, or half-yearly) through asset management companies.
Through this investment route, individuals are able to allocate funds to a scheme on a time-bound basis. Therefore, they do not have to worry about changing market conditions. SIPs can be started with as little as Rs. 500.
An Overview of SIP Types
The following are some of the most popular types of systematic investment plans:
Flexible SIP: It is common to refer to Flexi SIPs as flexible systematic investment plans, since they offer the flexibility to adjust the instalment amount as you see fit. A flexible SIP may be a good option if you are concerned about the market or have cash flow concerns.
Top-up SIP: By topping up/stepping up their SIP, investors can raise their instalments on a regular basis. Consider investing Rs. 2,000 every month in an index fund, for example. Increasing the payments every six months can be requested by instructing the asset management company. Following the six-month period, you’ll have to pay Rs. 2,500 for the next six months.
Perpetual SIP: Mutual fund schemes can be invested in for a fixed period of time. In that case, they must specify the start and end dates of their investment. It is a perpetual SIP investment if no end date is specified in the SIP mandate. You can continue to invest in a mutual fund scheme via SIP as long as you like if you choose this option. The fund house must be notified if you want to stop the SIP.
Investing Via SIP: How Does it Work?
Investing via a systematic investment plan involves following these steps:
Step 1: Decide which mutual fund scheme is right for you based on your financial goals and risk tolerance
Step 2: Decide on the investment duration
Step 3: Perform KYC and submit your application form online or by mail.
Lastly,
Using a SIP calculator will help you plan your investment and reach your financial goals in the most efficient way. Savings portfolios can be built according to your needs with adequate planning. As a result, you will be able to accumulate a large amount of wealth over time.