The easiest way to invest in mutual funds is via Systematic Investment Plan. Systematic Investment Plan (SIP) is a simple and easy investment process that lets you save and invest a fixed sum at regular intervals in mutual fund schemes. There are two ways to invest in mutual funds – either via lumpsum investing or via SIP. The introduction of SIP has made it possible for investors to invest small sums in mutual funds instead of making large bulk onetime investments. To understand how much one needs to invest in mutual funds via SIP investors can refer to SIP calculator.
What is SIP calculator?
An online tool accessible to all investors, SIP calculator is a calculator designed to allow investors to draw a rough estimate on the returns that they might earn through their SIP investments. These calculators are designed to gives investors a fair idea about how much their mutual fund investments can help them earn over a stipulated time.
How does a SIP calculator work?
SIP calculator is based on the following formula –
M = P × ({[1 + i]n – 1} / i) × (1 + i)
Where –
M stands for the amount you receive upon maturity
P stands for the amount you invest at regular intervals
n stands for the number of payments you have made
i stands for the periodic rate of interest
The following example shall help you understand how SIP calculator works –
If you want to invest Rs. 1000 every month over the course of 10 years with an annual rate of interest of 15%. The monthly rate of return will be 15%/120. Which means that the total value of your investment will be approximately Rs 2.79 lakhs.
Features of SIP Calculator
- A SIP calculator helps you get a fair ideal on the wealth you can create with your mutual fund investments at the end of the SIP journey.
- Knowing how much wealth you can create with SIP can help investors plan their finances in a better way
- If you know how much wealth you can create through SIP it will help you invest the in the most appropriate mutual fund scheme.
How to use online SIP calculator?
The options given in the SIP calculator may vary but its use is pretty much the same. Here’s how you to use an online SIP calculator –
- Enter the SIP sum (typically monthly)
- Enter the number of months you wish to invest this sum e.g. 120 months (10 years)
- Enter the expected rate of return which the mutual fund can offer
The calculator will display –
- total investment sum
- Sum accumulated with rate of returns
- Total sum including sum invested and sum accumulated through rate of return
SIP calculator is the best way to ensure that you invest the right amount of money in mutual funds so that in the long run you are able to achieve a commendable corpus. Creating wealth with mutual funds has become simpler with SIP calculator. Those who wish to increase their investment sum year after year can refer to top up SIP calculator where can get an estimate on gains that they will earn after increasing the investment sum after every 12 months.
Mutual funds do not guarantee returns but with SIP investors may be able to mitigate overall investment risk and earn more returns over the long run.
