SIP Calculator

Source: angelbroking

Investing in suitable asset classes is an excellent way to enhance financial corpus. Online tools like a SIP calculator only help to make this process easier for individuals. Such tools can save you the time spent for extensive research and analysis before investing. 

At the same time, such calculators can help individuals line up their SIP investments to ensure optimum income.

Still not familiar with the “what” and “how” of this online calculator?

Here is a brief overview to help you out. Read on!

A SIP investment calculator is an online tool that allows individuals to estimate their investment returns via SIP.

If you are an existing or potential mutual fund investor, you should know that a Systematic Investment Plan (SIP) is one of the 2 ways to invest in such fund schemes. It is a highly sought-after means of investment nowadays. This method allows individuals to invest in regular intervals, like monthly, quarterly, half-yearly, and annually.

This online calculator can help you gain insight into your potential wealth accumulation via SIP investments. This, in turn, can help you make an informed decision before allocating funds.

In this regard, several investors might want to judge the efficacy of a Systematic Investment Plan calculator. Here, understanding how this online tool operates can help users understand their predicted results.

A SIP calculator demands specific investment details from a user. These include investment amount, expected rate of return, total investment period, etc. Then, this tool employs such data in a mathematical formula to produce the required results.

The SIP calculator formula can be represented as follows:

A = [P x {(1+i)n – 1} x (1+i)] / i 

Where, 

A = Final amount you will get upon maturity,

P = Periodic investment amount,

i = Periodic interest rate, and

n = Total number of payments made

By using the SIP return formula, the online tool will display results for total investment, final expected return, and net income.

On some websites, you may need to enter your expected annual return rate and preferred investment frequency. For example, your expected rate of return per annum is 12%, and you want to invest Rs.1000 monthly for a period of 60 months.

In that case, ‘i’ will be calculated as 12%/12, that is, 1%.

Substituting the other values in the SIP formula, the total expected return amounts to Rs.82,487 against a total investment of Rs.60,000. Therefore, probable wealth gain is Rs.22,487.

Note that this SIP return calculator does not consider factors like expense ratio and exit load. These factors play an important role in determining your net income. Therefore, your actual returns might differ from the calculator’s result.

Nevertheless, having some idea is better than having no idea at all, isn’t it?

You can use the mentioned formula to calculate SIP returns manually as well. However, using an online tool can make the process a lot simpler and accurate.

If you are still not sure how to calculate SIP returns using an online calculator, here is a step-by-step guide.

Step 1: Go to the official website of your chosen AMC. Click on the option for the SIP calculator.

Step 2: Enter your preferred investment amount.

Step 3: Choose the frequency of investment from options like monthly, quarterly, etc.

Step 4: Select the total investment period.

Step 5: Enter your expected rate of return.

Step 6: Click on “Calculate” or any other equivalent button.

Using the above information, the online SIP calculator will display the following output.

• Total investment amount
• Total expected return
• Net wealth gain

Investors can employ the above results for a number of uses that can aid in effective financial management.

Want to know what these uses are?

Then, keep reading!

The primary utility of a SIP calculator is that it helps investors plan their SIP investments efficiently.

Depending on an individual’s financial goal, he/she can invest in either of the mutual fund types involving equity and debt instruments. While equity-oriented funds involve high risk and return, debt instruments like bonds provide better security. The future performance of both depends heavily on market conditions. 

Proper distribution of SIPs is one way to ensure adequate returns while cushioning your investments against economic shocks. An online SIP calculator only helps investors achieve this by developing a better perspective into their investment plan.

Users can alter the input values to check probable returns against different investment conditions. Accordingly, they can decide on the details most suitable as per their requirements.

However, the benefits of the SIP calculator do not stop here.  There’s more!

Go through the following list to understand how a SIP calculator benefits existing and new investors alike.

• Fast and accurate results: Manual calculation using the complex SIP calculator formula can be time-consuming. At the same time, it can be full of errors. Conversely, an online calculator can deliver precise results within a few seconds.
• Wide availability: Almost all AMCs provide an online tool to calculate SIP returns on their website. Interested individuals can simply visit such websites to know their desired results instantly.
• Free of cost: Websites do not charge any fees against using such online tools.
• Convenient usage: Users only need to provide a few simple details, as previously discussed. This way, even individuals without extensive financial knowledge can make wise investment decisions using the calculator’s results.