SIP Calculator: To Calculate Your Mutual Funds Return
Mutual funds wanted their investors to have an investment plan which was maintained in an organised manner. Hence, they came up with systematic investment plans (SIP). You have to invest a certain sum within defined time intervals. SIP investments are easy to use and perfect for risk-averse investors. No extra charges are charged; it does not come with the stress of share market volatility. The plan can also be discontinued any time the investor wants to. With the help of a mutual fund SIP calculator, you can also know the amount you will receive on maturity.
SIP is available to all types of investors. You can start with an amount as low as Rs.500. However, you must make regular payments. You can have weekly, monthly, quarterly, or annual payment due dates based on your chosen plan. The SIP return calculator considers the principal amount and the number of installments you have paid. You can find the SIP calculator easily available online for free.
Benefits Of the SIP Return Calculator
Here are some of how SIP calculators are extremely useful for you as an investor:
- Simplicity: The SIP calculators are very easy to use. You just have to find one online, put in the required inputs, and you will be presented with the return result quickly. After knowing your return from SIP, you can move forward to planning the other investments required to meet your financial goals.
- Less Information Required: To calculate your return through the SIP calculator, you just need to put in the amount along with the frequency of payment and the rate of return. The calculator will give you your return based on that.
- Free Of Cost And No Confusion: You can use these mutual funds SIP calculators for free. Also, if you are a new investor, these calculators will not confuse you as they require direct inputs and give direct results.
- Quick Results: SIP return calculators do not take time to function the equation and give you an immediate answer. You will get your results within a few seconds only.
How the SIP Return Calculator Works
The mutual fund SIP calculator works very simply.
Inputs Required
- You have to pay the amount in installments. A SIP investment can start with any amount equivalent to Rs.500 or more. However, Rs.1,000 is the minimum required investment amount in other investments.
- The total number of installments. A SIP starts with a minimum period of 6 months and can be extended to a long period. Long periods give higher returns, so you can choose the tenure according to your requirements.
- When you choose your SIP plan, you will learn about the return you will receive on it. So, the last input for the SIP calculator would be the rate of return on your SIP investment.
SIP return calculators can also help you determine the amount and number of installments required if you know the total amount of money you want from the investment after a stipulated period. Another thing that you should note is that the resultant figure from an advanced SIP calculator takes the expected inflation rate or capital gains tax into account.
Formula Used In Mutual Fund SIP Calculator
FV= P x {[(1+r) n -1] /r} x (1+r), where,
- FV is the future value of your investment.
- P is the amount you pay at respective intervals.
- r is the rate of return in periodic terms.
- n is the total number of payments you have made throughout the tenure.
Even though it is not required for you to know this formula, it helps in building investor confidence. If you know about the inputs and the workings of the formula, you will be satisfied with the SIP calculator's result.
SIP Calculator- A Practical Example
Question
Suppose you invest Rs.1,000 monthly for a year (12 months). Calculate the amount that you will be receiving on maturity. The rate of return on your SIP investment is 12%.
Solution
FV= P x {[(1+r) n -1] /r} x (1+r), where,
- P= Rs.1,000
- r = 12%/12= 1%= 0.01
- n= 12
So, FV= 1,000 x {[(1+0.01)12 -1]/0.01} x (1+0.01)
= 1,000 x [(1.1268-1)/0.01] x 1.01
= Rs.12,809 approximately.
Note: These figures are just an example. Market interest rates keep changing with time and inflation.
How Can You Invest In SIP Online
The steps to invest in SIP online are:
- Keep the Required Documents Ready: To get started, you would require your PAN card, address proof, a cheque, and a passport-size photo. Although your Aadhaar card is not essential, you can use it to simplify the process. A good internet connection will be beneficial.
- Complete Your KYC: As an investor, you must provide the basic information required and comply with the KYC norms. This can be done online, saving time.
- Use The SIP Calculator: If you want to choose a plan based on the return, use the SIP return calculator to learn about it and then choose the plan.
- Start Investing: After calculating your return, start with your first installment payment, and your SIP tenure will begin.
Final Words
A safe investment like a SIP can be very beneficial because you can estimate your return. However, make sure that your payments are made on time. Your SIP will be canceled if you do not pay 3 installments at a stretch. Use a SIP calculator to determine how much you can earn if you invest today!