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 |
Example – Suppose an investor wants to invest Rs. 2,000 every
month. The tenure of investment is 24 months and he/she expects
an annual rate of return of 12%.
The SIP calculation using the SIP calculator will be:
i = r/100/12 or 0.01
FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01
With the above investment, an investor can generate
Rs. 54,486 at maturity.
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.
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.
high and can be stopped when the markets fall?
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.
