SIP Calculator

What is SIP Calculator?

A SIP calculator is a simplified online tool that permits individuals to have an idea in regards to the returns upon the mutual fund where the investment has been done through a SIP. The SIP calculator is designed in a way that it gives the investors an estimate on the respective investment of the mutual fund. 

Besides, it is important to understand that the actual returns provided by any of the schemes of mutual funds depend upon different factors. In the case of the expense ratio and exit load, the SIP calculator will not offer any clarification for the same. This gives you a rough structure and a fair idea of the estimate on the amount of maturity for the SIP monthly on the premise of the projected yearly rate of return.

SIP Calculation Formula

The following formula is used to calculate the SIP plan amount:

FV = P x ({[ 1+ i ] ^ n-1 } x (1+i)

Here is the elaboration:

FV = Future Value (The amount to be received after maturity)

P = Amount that the investor invests

i = The rate of interest periodically

n = Total number of payments made by the investor till date

Let us understand the formula with an illustration:

Mr. X invests an amount of Rs. 1,000 per month in a SIP for 1 year (12 months) at a rate of interest of 12%. By these figures, the monthly return will be around 12% / 12 = 1 / 100 = 0.01

So, when we put the figures in the formula:

Future Value = 1,000 x ({[ 1 + 0.01 ] ^ {12 – 1 } / 0.01 ) x ( 1 + 0.01)

After calculation,

Future Value = Rs. 12,809 (approximately)

Note: The interest rate changes as per the market conditions. Hence, the value can never be defined exactly and hence will always vary.

How to Use a Systematic Investment Plan (SIP) Calculator?

Using a SIP calculator is a much-simplified process. Therefore, to avail the estimate of the return upon the investment made on the mutual funds via SIP through this tool, you need to follow the below mentioned easy steps:

Step 1: Provide the duration of the SIP that means the period wherein you wish to invest in the scheme of the mutual fund. The duration of the SIP could vary from months to some years.

Step 2: Gauge the pace of profit for your investment. You can decide this by checking the presentation reputation of the scheme of mutual fund in which you want to contribute. You can get insights about the profits of a mutual fund scheme to conspire either from the fact sheet, which is available on the website of the specific fund.

Step 3: The SIP calculator provides either the month-to-month SIP sum that you intend to put resources into a mutual fund plan of your decision or the objective corpus. If you fill in the measure of month-to-month speculation you are prepared to make, at that point assessed returns at development time are given. If you are utilizing the number cruncher to assess how much cash you have to put resources into a common reserve plan to get a particular sum toward the finish of your SIP period, at that point enter the objective sum and calculator will give the data of a necessary month to month investment.

The SIP calculator will display the accumulated amount towards the end of the tenure of the policy. You can also see a comparison of the accumulated sum of the mutual fund invested along with the fixed deposits.

How Does SIP Calculator Work?

A SIP calculator essentially works wherein the users enter the values, which implies that the users need to provide the information in regards to the investment amount, investment frequency, investment duration, and the returns expected.

Based upon the formula of compound interest, the SIP calculator has specifically been designed. The interest of the compound powers the returns on the mutual funds. The SIP calculator also enables one to get a comparison of the offered returns by the mutual funds along with the deposits that are fixed.

How Can a SIP Return Calculator Help You?

Many of the mutual fund specialists recommend SIP over any other mode of fund investment as it helps you to be more disciplined in terms of finances. Moreover, it also instills the practice of savings that will help you for a fruitful future.

You can easily use a SIP calculator online and can easily know the estimated returns that you would acquire post the tenure of SIP. It also helps you to determine the amount that you wish to invest and informs you regarding the complete amount invested and gives you the estimated value on the returns.

Advantages of Using the Systematic Investment Plan Calculator

Listed below are the key advantages of using a SIP calculator:

• It gives you the estimate based on, which you can plan your finances in a better manner.

• The SIP calculator permits you to have an estimation of the amount, which the mutual fund would accumulate towards the end of the tenure of the SIP.

• This estimation permits the individuals to opt for the right sort of scheme of the mutual fund.

What Are the Type of SIPs?

Here are some main types of Systematic Investment Plans one can choose to invest in:

1. Top-up SIP

   Top-up SIP helps in making investments periodically in which an investor can increase the deposit amount when they have higher income available for investment. This brings out the best results for an investor while making investments.

2. Perpetual SIP

   Perpetual way of investing means making an investment without a mandatory end date. Generally, SIPs come with an end term, that is, 1 year, 3 years, or 5 years, but in perpetual SIP, there is no such end date, making the investment more convenient.

3. Trigger SIP

   Trigger SIPs work for investors who are well aware of the market movements. Working just like shares, these SIPs can be bought and sold at any time depending on the market conditions. The start date, date of redemption, or switch date can be set once the event occurs.

4. Flexible SIP

   Flexible SIPs, as the name says, allow the investor flexibility of investment amount. The amount deposited in the Flexible SIP can be decreased or increased as per the investors’ financial condition.

How to Invest in SIP?

• An investor should keep the following steps in mind when they think of how to invest in SIP:

• The investors’ ultimate financial goal: The personal requirement of the investor

• The investment horizon: By what time the results are needed

• The risk appetite: By not falling into the market pressure and understanding their own risk bearing capacity

• The SIP frequency: Whether to invest monthly, quarterly, annually or one time

• The KYC documents: KYC documents are a must when going to start a SIP

Benefits of Investing in SIP

Systematic Investment Plan itself means investing your hard-earned money systematically that it earns fruitful results in the future. An investor attains several benefits while making investments in SIPs. Some of the benefits of investing in SIPs are:

1. Makes You a Disciplined Investor

   One of the best investment options for beginners as well as experts, SIPs bring discipline to an investor’s life because of the regular investments made in this kind of Mutual Fund investment option unlike, the Lump Sum option.

2. Power of Compounding

   A pocket-friendly amount invested in your SIP account leads to a handful corpus at the time of need because of the disciplined regular contribution. These investments at regular intervals for a pre-defined tenure show the power of compounding a small amount leading to a sufficient corpus in the future.

3. The Rupee Cost Averaging Factor

   With SIP plans, you can invest a small sum of money every month that eventually adds up to a considerable corpus. The money multiplies due to the power of compounding interest.  It allows you to leverage the concept of rupee cost-averaging for improved gains. This means that the investor can invest more when the market is low and less when the market is high.

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