SIP investments are one of the most popular ways of investing in mutual funds as this method comes with several benefits like rupee cost averaging, flexibility, and so on.
Besides, you do not need to invest a huge sum at a time. You can invest in small amounts every month, which, in turn, makes this scheme affordable for many people.
This way, SIP mutual funds instill financial discipline in you!
But, there are so many plans that you might get confused. You are much likely to want to know which mutual fund is the best for you. A SIP calculator will help you with the same and you will be able to confidently choose from the best SIP plans.
A SIP Calculator is such a tool that further helps you with your SIP investments by giving you an idea of the returns you will get after you pay your monthly premiums for a specific tenure. You can alter the regular investment field and the tenure field of the calculator to judge your investment accordingly.
Keep reading to get a good grasp about the Systematic Investment Plan Calculator:
Meaning of SIP
Systematic Investment Plan, abbreviated as SIP, is a type of investment in mutual plans, which allows you to invest a fixed amount of money in a mutual fund scheme.
This method is preferred by a lot of people as they do not have to invest a huge sum of money at a time. On the other hand, many people cannot afford to make a lump-sum investment.
So, via SIP you can invest a small amount of money in any of the best SIP plans in a periodic manner.
Besides, it is hassle-free as the fixed amount is automatically deducted from your savings account and paid towards the funds you have chosen to invest in.
What is a SIP Calculator?
A SIP Calculator is a type of calculator available online that helps you to get an estimated figure of the returns/ maturity amount of your SIP mutual fund investment.
All you need to do is fill in a few fields of the calculator, and you will get an estimate of the returns you are to receive after the investment tenure.
So, you will get a rough estimate of your returns based on a projected rate of interest.
Systematic Investment Plan (SIP) is a way of investing in any mutual fund of your choice wherein you have to invest a small amount periodically, unlike a lumpsum investment.
Note: SIP mutual fund calculators will give potential investors the estimated returns’ figure they’ll get from their investments.
However, keep in mind that the actual returns depends on several other factors and might vary.
Also, the Systematic Investment Plan calculator does not consider the exit load and expense ratio while calculating.
How does a SIP calculator work?
You need to enter the following details in their respective fields of the SIP calculator:
- Your periodic investment amount (mostly monthly)
- The interest rate of the mutual fund in which you are investing.
- The tenure of the investment.
The SIP calculator will then make use of the following formula to give you an estimate of the returns you are to receive after the investment tenure:
M = P × ({[1 + i]n – 1} / i) × (1 + i)
Here,
- M = Maturity Amount
- P = Regular investment amount
- i = Rate of interest
- n = No. of payments made
For instance, if you invest INR 5000 for 12 months at 12% rate of interest, then the maturity amount will be:
M = 5,000 X ({[1 + 12%]12 – 1} / 12%) x (1 + 12%)
Hence, the maturity amount (M) = INR 63,413
Benefits of using SIP calculator to calculate investment
A SIP calculator is easily available online. If you google the term, then you the search result will show you hundreds of sites that provide free usage of their SIP calculator.
The SIP calculator helps you to make sure that your investment portfolio is as per your needs and suits you properly:
And it does so by helping you with your SIP investment in the following ways.
1. Helps to decide premium and tenure
Once you get the idea of the final returns you will get, then you can decide on the amount you wish to invest accordingly. You can also alter the number of investments to further decide upon the tenure that is giving you maximum returns as per your requirements.
2. Tells you the total invested amount
The SIP calculator will give you the total investment you have made along with telling you the returns you will receive. So, now you can get an idea of the profit you’ll make on the investment.
3. Gives you the Estimated Returns
You will get an idea of how much money you will end up with after the investment tenure. So, you can choose the tenure and investment amount accordingly.
How to use a SIP calculator?
Using a SIP calculator is extremely easy:
You just need to enter the monthly SIP premium, the number of years you want to stay invested in the scheme, and the rate of interest on the mutual fund scheme.
When you are done typing in the figures, the SIP calculator will immediately show your estimated returns. And this is the estimated figure you will receive after the entire investment tenure.
Some calculators allow you to find your monthly investment figure too if you how much you want to receive at the end of the investment.
These SIP calculators can help you to meet the following two requirements:
1. You wish to invest in SIP and want to know the maturity amount of the investment
Follow the given steps to know your estimated returns:
- Select your monthly premium amount.
- Enter your investment period along with the expected return date
- Just like that, the SIP calculator will now tell you how much you are to receive at the end of this investment. Besides, it will also show you the total amount invested and your capital gains.
2. You want to achieve a financial goal and wish to know the required monthly premium for the same
- Enter the amount you want for the goal
- Enter the expected return rate and the time horizon of the goal.
- The calculator will now tell you how much you should start your SIP investment with.
How can a SIP return calculator help you calculate your estimated SIP returns easily?
By now, you must have understood that an online SIP calculator makes investing in the best SIP plans much simpler:
It does so by giving you an estimated returns figure that you will receive at the end of the investment tenure.
So, this way you can decide what amount to start the investment with.
Not just that you can modify or alter the details like investment tenure, rate of interest, etc. and check what difference the changes make to your final returns:
You can also add the details of different funds and compare them to decide the best fund for you.
FAQs about SIP Calculator
- Do I have to pay a fee to use a SIP calculator?
Ans. No, the online SIP calculators are absolutely free to use.
- Are SIP investments tax-free?
Ans. No, all SIP investments are not free of taxes. The SIP investments made towards ELSS mutual funds are eligible for tax benefits up to INR 1.5 lakhs per year under the Section 80C.
- What is the SIP return rate?
Ans. SIP return rate depends upon a lot of factors. For example, equity schemes give higher returns than debt funds. However, you can expect a return of 12-15% returns from large-cap equity funds, and 14-17% from mid-cap equity funds.
- Is SIP better than RD?
Ans. FDs and RDs give fixed returns. SIPs are market-linked schemes, so there is a bit of risk associated. The SIP returns are higher when compared to FDs which will give you fixed returns. For example, even if you are investing in a SIP in a liquid or debt fund, then also it will generate higher returns than Recurring Deposits and risk associated will be negligible.
- Is withdrawal at any time allowed with SIP?
Ans. Yes, withdrawal at any time is allowed with SIPs, except for ELSS whose lock-in period is 3 years.
- Can I increase my SIP investment amount?
Ans. Yes, you can increase your SIP investment amount. You can do this while buying a new SIP, you can then opt for a periodic top-up of your investment amount. You can also opt for an auto-top up while buying the SIP in the first place.
- What is the minimum amount that I can invest in SIP?
Ans. You can start a SIP investment with a minimum of INR 500 per month.
- How long should I stay invested in SIP?
Ans. You have the complete freedom to start or stop your SIP investment. So, you can terminate your SIP whenever you want to. However, if you stay invested over the long term, then you will get high returns, and so, you should stay invested for as long as possible.
- Should I terminate my SIP when the market crashes?
Ans. No, absolutely not. This is a big mistake that many investors make. When the markets fall, you can buy more units at the same SIP premium. When the markets go high, you can redeem the same units to make profits. So, it is recommended that you do not terminate your SIP when the market crashes, instead increase your SIP amount at such a time.
- How to cancel my SIP?
Ans. You can terminate your SIPs online or by contacting your fund house directly or via an agent.
