SIP Calculator – Systematic Investment Plan Calculator
Saving and investing are two of the best habits that individuals can inculcate now to benefit in the future. Wealth creation takes a long time and therefore the ideal choice is to
begin now. A conscious effort is required in creating the financial corpus that one may need for a financially comfortable future. One of the investment instruments that can help to generate a suitable financial corpus for the future is a Systematic Investment Plan or
an SIP.
Table of Contents
What is SIP Calculator?
A Systematic
Investment Plan (SIP) calculator is a financial tool that can help in calculating the returns that an investor may earn through SIP investments. The calculator also estimates the
amount of money that an investor must invest every month to earn a target corpus in the future. In simple terms, a SIP calculator shows a roadmap to investors for achieving various financial goals.
The SIP calculator is an effective tool to automatically compute complex financial calculations, without investors having to manually calculate. All it requires is for
investors to provide a few key inputs to arrive at the result within a few seconds.
How does a SIP calculator work?
A SIP calculator requires users to enter certain values like the amount to be invested, frequency of investment, investment duration, and the expected returns.
The SIP calculator is based on the compound interest formula. Investors can better understand the SIP calculator functionality with the help of below-mentioned formula.
| FV = P [ (1+i)^n-1 ] * (1+i)/i | |
|---|---|
| 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 |
| r | Expected rate of return |
How to use a SIP calculator?
The Fisdom systematic
investment plan (SIP) calculator is very easy to use for seasoned as well as new investors. To estimate the returns on a mutual fund investment through SIPs, an investor
needs to follow the below-mentioned steps:
- Choose the SIP frequency
- Enter the amount to be invested in each SIP
- Enter the duration of SIP
- Enter the expected rate of return
The SIP calculator will then display the amount that can be accumulated at the end of the SIP tenure
What are the advantages of using a SIP
calculator
Some benefits that can be derived from a SIP calculator are:
- Systematic Investment Plan (SIP) calculator helps an investor to get an estimate of the amount that a mutual fund investment can accumulate at the end of the investment tenure.
- The estimated income at the end of the investment tenure can help investors in planning their finances better.
- It allows investors to make the right choice among various mutual fund scheme options
- It helps to avoid the hassle of manual calculation for expected returns from SIP.
Example of using a SIP calculator
Suppose you invest Rs 2,000 per month for a duration of 2 years with an expected annual rate of return of 12% (r).
You can calculate the monthly rate of return as i = r/100/12, which is 0.01.
Using the formula FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01, you can estimate that the total amount at maturity will be approximately Rs 54,486.
Conclusion
Mutual fund investments done through the Systematic Investment Plan (SIP) route allows investors to adopt a smart financial planning with the objective to create wealth in the long run.
By investing small amounts of money every month, over a period of time investors can enjoy the benefits of rupee cost averaging and also the power of compounding. SIP calculator acts as a tool to make the process of estimating the quantum of investment and returns easier for investors.
FAQs
You can easily start a SIP online by downloading the Fisdom app on your smartphone. The app allows a seamless investment process while providing varied mutual fund options customized to your needs across different risk and return ranges.
Investors often believe that the SIP date plays an important role in generating substantial returns. However, SIP date does not play a significant role especially from a long term perspective. It can be selected as per one’s convenience.
Mutual funds can be equity, debt or even hybrid schemes. SIP is only a medium of investing in mutual funds. The choice of mutual funds entirely depends on personal investment horizon and risk taking ability. SIPs are ideal for equity and equity-oriented hybrid funds since these are prone to market fluctuations. However, an investor can even choose to invest in a debt fund through SIP.
No, investors should not base their SIP investments on market movements. SIPs should ideally be considered from a long term perspective as these carry the benefit of rupee cost averaging. There will be higher chances of wealth creation if one stays invested for a longer duration.
If you have invested in a SIP online, there will be a cancel SIP option available for future transactions. You can either cancel it online or even pause the SIP for a certain period of time. This can be done easily if you have invested through Fisdom App or through your mode of investment.
