Why should you use a SIP Calculator?

Why should you use a SIP Calculator?

A Systematic Investment Plan (SIP) is a popular way to invest in mutual funds in India. It is suitable for those who wish to invest a small amount each month, instead of a lump sum all at once. Investments can be made weekly, monthly or quarterly.

A fixed amount is invested from the investor’s bank account to buy a specific number of units of the SIP at the current market rate. In this way, SIPs can help develop the habit of saving through disciplined regular investing, without adding to the investor’s monthly budget.

How does a mutual fund SIP calculator work?

As an investor, you can get an idea of ​​the returns of SIP investments in mutual funds with an online SIP calculator. All you need to do is enter some basic information and you will receive an estimate of returns. However, keep in mind that actual returns may differ due to various factors, including market conditions.

You can also find out how much you should invest in a mutual fund to achieve your long-term financial goals using a SIP calculator.

A SIP Return Calculator works using the formula below:

A=P* [{(i + 1) n – 1} ÷ i] * [i + 1]

Here:

  • A is the amount received at maturity.
  • P is the amount invested regularly.
  • n is the number of investments you have made.
  • i refers to the periodic interest rate.

Suppose you want to invest ₹1,000 per month for 12 months at 12% interest rate. In this case, the rate of return will be 12% ÷ 100 = 0.01. This means that the amount you could receive at maturity is ₹12,809 (approximately) per year. Remember that the interest rate may vary depending on market conditions.

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How do I use a mutual fund SIP calculator?

Manually calculating returns using the formula above can be tedious, if not difficult. Consider using a online SIP calculator to save time and effort, while obtaining estimates free of human error.

You can find an online SIP calculator on the website of the mutual fund house you choose. You just need to log in to the website and search for the calculator. So go ahead and use the SIP Return Calculator for free. To do this, you need to follow these steps:

  1. Enter the amount you choose to invest regularly. The minimum amount you can invest in mutual funds is usually ₹500 per month. You can also check the minimum amount that can be invested in other schemes.
  2. The calculator will evaluate the estimated returns based on the rate of return of the specific investment scheme. To know the possible rate of return, you can consult the history of the fund.
  3. In the last step, you must enter the duration of your SIP investment. Although the minimum investment period is 6 months, it is a good idea to stay invested for the long term. This can increase the chances of getting higher returns.

You can keep tweaking the mutual fund SIP calculator variables to settle for the best possible return. Just keep in mind that any result displayed by the calculator has been calculated after taking into account capital gains tax and the possible rate of inflation. Therefore, the results may not be accurate.

Benefits of Using a Mutual Fund SIP Calculator

  • It is quite simple and easy to use calculator. Even new users can use the tool easily, by providing some basic information.
  • Since the SIP calculator works online, the results are generated automatically. Thus, you can quickly know the estimated returns of your regular investments. This can help you plan your investments appropriately to achieve your long-term financial goals.
  • You can save effort and time since the online tool removes the need for manual calculations.
  • No further details are necessary, other than information about your regular investments, the rate of return of the chosen fund and the duration of your investment. The tool has a user-friendly interface.
  • You can use the online SIP calculator for free.

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A systematic investment plan is a very reliable form of investing for mobilizing small savings and investing them to achieve your long-term financial goals. Just be sure to use a SIP calculator to plan your mutual fund investments.