Prospective investors can think that SIPs and mutual funds are the same. However, SIPs are merely a method of investing in mutual funds, the other method being a lump sum. A SIP calculator is a tool that helps you determine the returns you can avail when parking your funds in such investment tools. Systematic Investment Plan or SIP is a process of investing a fixed sum of money in mutual funds at regular intervals. SIPs usually allow you to invest weekly, quarterly, or monthly.
SIP Calculator is a valuable tool that helps investors estimate the future value of their mutual fund investments made through a Systematic Investment Plan (SIP). By inputting the monthly SIP amount, investment duration, and expected rate of return, the calculator can determine the projected corpus amount at maturity. This tool empowers investors to make informed financial decisions by providing a clear understanding of the potential growth of their SIP investments.
What is a SIP Calculator?
A SIP calculator is a simple tool that allows individuals to get an idea of the returns on their mutual fund investments made through SIP. SIP investments in mutual funds have become one of the most popular investment options for millennials lately.
These mutual fund sip calculators are designed to give potential investors an estimate on their mutual fund investments. However, the actual returns offered by a mutual fund scheme varies depending on various factors. The SIP calculator does not provide clarification for the exit load and expense ratio (if any).
This calculator will calculate the wealth gain and expected returns for your monthly SIP investment. Indeed, you get a rough estimate on the maturity amount for any of your monthly SIP, based on a projected annual return rate.
How can a SIP return calculator help you?
SIPs are a more lucrative mode of investing funds compared to a lump sum amount according to several mutual fund experts. It helps you become financially disciplined and create a habit of savings that can benefit you in the future.
A SIP calculator online is a beneficial tool, which shows the estimated returns you will earn after the investment tenure.
Few of the benefits of SIP calculators include –
- Assists you to determine the amount you want to invest in.
- Tells you the total amount you have invested.
- Gives an estimated value of the returns.
How do SIP calculators work?
SIP Calculation Formula
- FV = Future value or the amount you get at maturity.
- P = Amount you invest through SIP
- i = Compounded rate of return
- n = Investment duration in months
Example of a SIP Calculator
Jane is 30 years old and works as an investor. She is thinking about how she can invest money for retirement purposes. So, Jane decides to put money into a mutual fund product via a Systematic Investment Plan.
- Investment amount: ₹35,000 per month
- Investment period: 30 years
- Expected interest rate: 8% per annum
- Frequency of investments: Monthly
Result:
With the above Formula the SIP Calculator would give following results:
- Future Value of the investment: ₹5,25, 10,331
- Total Investment: ₹1,26,00,000 (35,000 * 12 * 30)
- Potential Returns: ₹3,99,10,331 (Future Value – Total Investment)
Advantages of Using a SIP Calculator
- Accurate Planning: SIP calculators forecast the future growth of an investment well based on specific input criteria. It includes the amount to be funded, the duration, and the expected return. SIP calculators apply mathematical algorithms. It develops definite approximations so traders can manage their finances.
- Comparison of Several Scenarios: Changing the components of your inputs in SIP calculators, like amount, duration, and anticipated rate, means that they help users evaluate various investment conditions. They assist them in making informed choices. It is based on their economic objectives. Thus coming up with alternative investment strategies that may result in desirable outcomes.
- Visualisation of Potential Returns: Through systematic investing, SIP calculators help buyers see how their money can grow. Regarding their investing plans, graphs and charts are also available to help them understand the power of compounding. It enables them to make informed choices.
- Goal Setting and Progress Monitoring: SIP calculators aid traders in setting attainable financial targets and monitoring their progression towards them. By entering their specific financial goals, such as retirement savings or funding their child’s education, investors can estimate the required investment amount. From there they can see how they progress over time.
FAQs
Are SIPs similar to mutual funds?
People often tend to think of SIP as either mutual funds or different than a mutual fund. The fact is that SIP is just a style of investment and not a fund/scheme or a stock/investment avenue. It is an investment vehicle to invest periodically in a fund/scheme of your choice.
How to calculate SIP returns in Mutual Funds?
To calculate SIP returns in mutual funds, divide each SIP amount by the respective NAV to get the units, sum all units purchased, and add all SIP amounts for total investment. Multiply total units by the current NAV for current value. Calculate returns using ((Current Value – Total Investment) / Total Investment) * 100