Long gone are those days when the savings were enough to sustain life.
The time has changed now, and so have our needs.
To cope with the growing world, you need considerable money at hand, with the fact that it cannot be grown by just keeping it in a bank account. It needs to be invested for wealth creation and to fulfill future goals. While there are many ways to ensure that, mutual fund investment is one of the popular and preferred ones, with SIP being one of the two methods to invest in, and the other being lump sum.
While with a lump sum investment, the investors invest a whole amount at once. A systematic investment plan (SIP) allows investors to invest a small sum in their preferred mutual fund scheme at regular intervals.
An Investor can choose the frequency of his investment as weekly, monthly, quarterly, bi-annually, or annually. They can also initiate or terminate their SIPs as per their wish without any restriction.
In a SIP plan, when your SIP investment gives returns, the returns are added to your actual investment amount, and then it is again invested. Over time, your regular SIP and the returns earned by them create a compounding effect that provides you exponential growth. It’s a tried and tested way that works well for long-term financial goals.
If you have been looking to invest in mutual funds through a Systematic investment plan (SIP), it’s essential to understand how & what SIP offers you and use the information to make an informed decision. A SIP calculator can help you with the task.
Besides, manual computation of the SIPs can sometimes be labor-intensive. It involves frequent payments, and the holding period for each investment will be different at the given point in time, & returns will differ, as well.
What is a SIP calculator?
A SIP calculator is an assistance tool that gives an estimate of return from a mutual fund investment through SIP.
With a SIP calculator, you can plan your future financial goals, whether you want to buy your dream car, build your own house, or you just want to ensure a comfortable retirement life. Basically, it helps you make informed decisions and a heads up on your mutual fund investments.
Remember that the actual returns you would receive might vary owing to several factors and differ from what you will get from the SIP calculator. The SIP calculator also doesn’t account for any exit load (the fee charged during exiting or redeeming a fund) and the expense ratio (the fund management fee and other additional costs).
Few benefits of using a SIP calculator:
- It helps you determine the amount you must invest in.
- Provides you the amount you have invested in mutual funds
- It gives you an estimation of your return from mutual funds.
That is how the SIP calculator works,
A SIP calculator employs a simple formula:
M = P x ((1 + i)n – 1) x (1+ i)/i
- M denotes the amount you will receive upon maturity
- P denotes the amount you invest in regular intervals
- i denotes the periodic rate of interest
- n denotes the number of payments you have done
Suppose you want to invest Rs 500 per month for one year, and the periodic interest is 12%
then your monthly rate of return will be 12%/12 = 0.01
The amount you will receive upon maturity can be calculated as follows,
M = 500 x ((1+ .01)^12 – 1) x (1 + .01)/.01
M = 500 x (1.01^12 -1) x1.01/.01
M = 500 x (1.0124 -1) x 101
M = 6405 approx
The maturity amount of your portfolio is therefore 6405, and your return is 6405 – 6000 = 405.
However, these manual calculations are tedious and are prone to incorrect results.
Here, the SIP calculator from Glide Invest is the best resource to employ to simplify the SIP calculation process.
The SIP calculator for mutual funds eases your process with three simple selection options.
- Monthly investment amount
- Investment period in years
- Expected rate of return
First, you have to select the amount you would like to invest in each SIP. The investment amount can be as little as Rs. 500 or as high as Rs. 200000, depending on the amount you wish to invest.
Now, select the investment period for your mutual funds. Here, you have to choose a time frame for which you want to stay invested in the fund through SIP. You can select anywhere from 1 year to 30 years that could help you achieve reasonable returns.
Finally, select the expected rate of return.
Once you select all three options and give the input, the SIP calculator produces information like,
- The estimated maturity amount you will receive at the end of your tenure.
- The investment needed from your side to fulfill your financial goals.
- What returns you are likely to get from your investment.
It also provides a graphical representation of how your earnings would grow over the investment tenure.
You can adjust the values and find the best combination for your budget and objectives.
Let’s understand this with an example.
Take an instance, you want to invest Rs 3000 per month as SIP for ten years, and the expected rate of return is, let’s say, in this case, it is 10%. On the calculator, you select these values, and it gives you the corpus you would make. In this case, you will earn a total corpus of Rs. 6.1 lakhs. You can change the values as many times as you like to see how your investments would turn out for you.
The calculator is a great and highly effective way to compute complex financial calculations with a few clicks and taps, and the result appears to you in a matter of seconds.
Utilize the mutual fund SIP calculator to estimate the best possible returns of your investment interest and put better future earnings to fulfill your financial goals.
Go ahead, try and take your SIP today.