SIP Calculator

Disclaimer: Past performance is not an indicator of future returns

SIP Calculator: Plan Your Financial Future with the Ultimate Investment Tool

Disciplined and well-planned investments are the core pillars of long-term wealth creation. A common path that investors take to achieve this goal is a Systematic Investment Plan (SIP). It is also important to know how much you have to invest and what returns you will get. That is where the SIP calculator comes in, as it gives you confidence in making sound financial decisions.

What is a SIP Calculator?

A SIP calculator is an online tool that helps to determine the estimated value of the future investments you would have based on the monthly payments you’ll make. It considers several circumstances, including investment value, tenure and anticipated rate of annual returns. Based on these inputs, the calculator assesses the sum of investments that you will have made, the returns that you will be able to acquire, as well as the estimated maturity amount.

How does the SIP Return Calculator help you?

The SIP return calculator is an indicator of better financial planning. It can assist you in the following ways:

• Goal Planning: It gives you an opportunity to match your SIP with specific financial goals like a retirement corpus, a higher education fund or buying a house.
• Return Estimation: It allows you to test the amount of investment, period, or expected return to see what the possible outcomes are.
• Comparison of Investments: The comparison of different SIP options can help you to find out the most appropriate one with reference to your objectives and level of risk.
• Motivation to Be Consistent: When you see how a small investment turns into a huge amount, you are motivated to keep investing on a regular basis.

How does a Systematic Investment Plan Calculator work?

A SIP investment calculator operates on the concept of compound interest, or to put it in simple terms, the returns that are being earned on your investment are used to earn more returns. This compounding effect will assist your investment to grow with time.

In order to operate the calculator, you should put in:

• The amount of monthly investment
• The tenure
• The anticipated rate of returns per year Once you enter such details, the calculator automatically results in:
• The total invested amount
• The estimated total returns
• The maturity amount This is a fast computation that enables you to know how your monthly investments will grow and what returns you will be able to get by the end of the investing period.

How to Use a SIP Calculator?

In order to use a Systematic Investment Plan calculator, you just need to follow a few simple steps. Here’s how you can use it effectively:

• Enter the Investment Amount: Enter the amount you would like to invest monthly through SIP.
• Select the Duration: Choose the time frame of the investment.
• Add Expected Annual Return: Put an estimated return rate depending on your chosen mutual fund scheme.
• Get Instant Results: The calculator will perform some mathematical calculations in the background and will immediately show your total investment, estimated gains and maturity amount.

How Are SIP Investments Calculated?

The SIP Calculator uses a mathematical formula to estimate the overall outcome of your investment. The tool calculates how regular the monthly investments can grow over time if the results are compounded.

The formula to calculate the future value of your SIP is:

FV = P × {[(1 + i)^n – 1] / i} × (1 + i) Let’s break down the terms mentioned in the formula:

• FV = Future Value or maturity amount
• P = Monthly investment through SIP
• N = it is the number of payments you have made.
• I = It is the periodic rate of interest.

For example, if you invest ₹5,000 every month consistently for five years with the expected rate of return of 12%. The output will be calculated by the following process:

P = ₹5,000 (monthly investment)

i = 12% annual return ÷ 12 months = 0.01 (monthly rate)

n = 5 years × 12 months = 60

Step-by-step process:

FV = 5,000 × {[(1 + 0.01)^60 – 1] / 0.01} × (1 + 0.01)

FV = 5,000 × {(1.8167 – 1) / 0.01} × 1.01

FV = 5,000 × (81.67) × 1.01

FV = 5,000 × 82.49

FV = ₹4,12,450 (approx.)

Therefore, the calculator shows that your total investment is ₹3,00,000 and the accumulated interest is ₹1,12,450, which combines the maturity amount as approximately ₹4,12,450.

What is SIP?

A Systematic Investment Plan (SIP) refers to an investment plan of putting in a given sum of money at a set period of time in mutual funds. You make deposits every month, and later your money will grow steadily with the fluctuations in the market.

Types of SIPs

SIPs are available in various forms, and they are tailored to suit various investment requirements. Some of them include:

• Regular SIP: This is a fixed amount that has to be invested every month.
• Top-Up SIP: It allows one to contribute to the SIP at any time.
• Flexible SIP: You can also change the value of your SIP depending on your budget.
• Perpetual SIP: It is a continuous SIP and it has no end date.
• Trigger SIP: Starts or stops upon set market or date triggers.

Benefits of SIPs

There are several benefits of a Systematic Investment Plan for investing in mutual funds or different forms of investments. Some of them include:

• Power of Compounding: The higher the returns, the higher the returns you get as time goes by.
• Rupee Cost Averaging: Purchase more at low prices and fewer when prices increase.
• Minimal Investment Requirement: You can begin with as little as ₹500 or ₹1000 per month, depending on the fund you choose.
• Fosters Discipline: Promotes saving habits and long-term focus.

Final Thoughts

The SIP investment calculator is a valuable asset to every investor due to its capability to deliver precise projections, various inputs and real-time output. It helps you plan your investment strategically, being aware of potential returns and visualising the benefits of regular investing in a better way. So, what are you waiting for? Start today and begin your investment journey.