A SIP Calculator is a tool that helps investors calculate their estimated returns when investing in mutual funds through a Systematic Investment Plan (SIP). It can be used to determine how much an investor will earn by investing in mutual funds through a SIP over a certain period. The calculator considers factors such as the amount of money invested, the frequency of investments, and the expected annual returns. By using the SIP Calculator, investors can determine the amount of money they need to invest in getting the desired returns.
What is a SIP Calculator?
Are you just getting started with your investment journey in Mutual Funds? Do you want to know how much return you can potentially gain based on your investment budget? Here you can find out how much money you can make in a few years with the help of a SIP Calculator. A SIP Calculator is an online tool that intakes variables including monthly investment capacity, investment duration, and expected rate of return. These variables are computed together with the help of a SIP Calculator to give an estimated value on return at maturity. Users will also have the provision of manipulating the values to get different deals. For instance, if your monthly funding scope lies around INR 500, investing for a tenure of 5 years might get you an INR 9,000 gain at 10% per annum and an INR 15,000 gain at 15% per annum.
How do SIP calculators work?
The SIP Calculator's primary function is to show you an estimation based on your inputs on your monthly funding proportion, number of years, and desired rate of interest. These calculations are computed in real-time and show varied results even when tinkering with the values. The results generally include the wealth gained over your investment and the total income at the end of maturity.
The input required for the calculation:
- Monthly Contribution
- Number of months or years
- Expected rate of interest
The calculation is run through a generic formula:Amount A = P [ ( 1 + i ) ^ n : 1 ] * ( 1 + i ) / i
- A is the Amount receivable
- P is the principal amount you contribute
- i is the rate of interest
- n is the duration, and
- r is the expected rate of return.
Take an example where you invest INR 1,000 per month for 36 months. You expect a 12% annual rate of return (r). You get INR 43,507 at the expiration of the term.
How can a SIP return calculator help you?
Systematic Investment Plans (SIP) are a rewarding wager of a part of one’s income that allows them to pitch in a small number of their earnings into an investment such as mutual funds, trading, shares, and bonds only to get a relatively significant return out of it. The SIP Calculator will come in handy for the investor to determine various aspects of their contribution, including the right subscription amount, returns expected, risk tolerance and total earnable amount. The online tool is very user-friendly and makes the computation real-time. Additionally, this tool provides serious investors with the data required to assimilate their investment value.
What is a SIP (Systematic Investment Plan)?
A SIP is a regular surrender of monetary assets put away on investments such as mutual funds, shares, trading accounts, or annuities, with the sole intention of making a more significant return towards the end of a specific period. This long-term, low-risk flutter has proven to be generally rewarding and ideal for an individual with a regular income. Unlike making large payments at once, SIPs can be done away with small contributions at regular intervals. Many financial institutions and agencies offer investors their platform and expertise to capitalize on systematic investment opportunities.
What are the types of SIP?
There are a few different variants of Systematic Investment Plans (SIPs). These include top-up SIPs, flexible SIPs, and perpetual SIPs.
It is an incredible opportunity for individuals who have received an income raise and want to increase their investment for a particular month. The Sip top-up feature allows the investor to make an extra payment to reach their income goals faster. As more investment means more returns, this feature helps investors with additional income-earning opportunities. For example, if a user contributes INR 500 per month and wants to invest an additional INR 500 to top up the amount.
Another great way to invest is for individuals who have a dynamic income. The Flexible SIP feature allows users to invest in different amounts every month. This can be helpful for entrepreneurs and self-employed people who want to invest but cannot fund the same amount every month. They can balance their investments in the long run by averaging their contributions.
Every investor is different with different goals. Some like smaller durations, whereas others do not so much. With a perpetual Systematic Investment Plan, users can subscribe to the plans for a more extended period. Once the subscriber is content with the return amount, they can redeem their earnings.
How to invest in SIP?
Those pondering about how to start their investment journey in a Systematic Investment plan can refer to the suggestions provided below:
- Locate the right investment option in Mutual Funds: Various entities offer mutual fund solutions in the market. Decide on a mutual fund that outlines your goals.
- Make an application laying down your basic details: Complete your 'Know Your Customer' by submitting various government-approved documents and getting registered.
- Select the term: You will need to select an investment period that can range from around six months to whenever you want to stop investing.
- Assess the SIP type: Do you want to invest flexibly, or do you want to make a regular payment? Do you want to invest for a lifetime or a particular period? Decide what you want and apply accordingly.
- Join the investing journey: Pick a date. Invest regularly.
It is advisable to invest for the entirety of its tenure because SIPs are an easy and uncomplicated strategy to ensure long-term wealth.
Benefits of Investing in SIP?
Investing through SIPs is a great way to create a reasonably ample amount of wealth that is usually risk-free and convenient. To enumerate a few of these benefits:
- SIPs apply value investment principal to regular investing: Investing through SIP can get your value to average out with the dynamic market price. One can invest as much when the market rates are plunging and limit when it's ascending. This will majorly balance out the total contribution, which would be immune from market fluctuations. In this scenario, returns are still guaranteed.
- Compounding aspect of the investment: The interesting process in which the returns on a principal amount are added to the computation of returns in the upcoming cycle. The income towards the end is exponentiated, allowing the investor to earn more.
- For instance: when you put away INR 1000 in a SIP with an interest rate of 10% per annum, you get back interest of INR 100 by year-end. From the second year onwards, the interest is not calculated on INR 1000 but on INR 1100. This, in turn, gives a return of INR 110 instead of INR 100. This increment over time becomes significantly large.
- Easy and investor-friendly: Investing in a SIP plan is an easy process. Make use of the auto-debit option that most banks provide. Here, the amount that needs to be paid is generally given up by the bank, adding it to the investment pool. The invested amount can also be monitored by SIP provided apps.
- Perfect device for financial planning: Whatever your life goals may be, Systematic Investment Plans are a great way to secure your future financially. So start brainstorming your goals, and consult a financial expert who can guide you through the best schemes for investment plans that suit your requirements.
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Frequently Asked Questions (FAQs)
What are the benefits of a SIP Calculator?
A SIP Calculator is a tool that allows aspiring investors to pre-empt the risk of punting out their money in SIPs. Furthermore, it will enable users to get a fair idea about the return they can expect from their investments. This tool is easy to use and benefits novice and experienced investors alike. And most importantly, one can decide if the returns are worth their contributions.
How does a mutual fund SIP work?
SIP is a scheme where you can periodically invest your money in small chunks to any investment tool such as mutual funds, bonds, and shares. When you put your money in a mutual fund scheme, the contribution reflects the market value of the specific fund you invested in, consequently increasing or decreasing your monetary value. Over time, these accumulated savings are generally expected to give a relatively larger return.
What is the use of a SIP calculator?
SIP Calculator is to pre-empt a financial outcome based on recurring contributions made to mutual funds or other investment options. The calculator helps break down the earnings that can potentially build up after investing for a particular time. The results are essential in assessing the subscription capacity, rate of return to look forward to, and investment duration.
How does compounding work with SIP?
Compounding adds the accumulated interest value to the principal amount each successive year owing to the variable principal sum. Here, the base figure on which the interest is calculated varies as per the previous year’s total. Over time, this grows into an accumulation of the last sum. The longer the contribution, the larger the corpus earned.