What is SIP Calculator?
A SIP Calculator is an investment tool, which helps you to calculate or make an estimation on the Mutual Funds returns. This is designed to estimate the expected returns on your investment in Mutual Funds through SIP. Perhaps, the actual returns depend on the several factors of the Mutual Funds you invest in. This online tool helps its investor to calculate the SIP amount which is based on expected annual returns to achieve the financial goals.
SIP Calculator Online
The following diagram will show you the SIP Calculator layout:
|Investment Duration (years)*15|
|Expected Annual Returns (%)*12%|
How to calculate the returns on SIP Calculator?
SIP Calculator based on the following formula:
FV = P [ (1+i)^n-1*(1+i)/i]
Here, the symbols represent-
- ‘FV’ represents the value of the amount a person gets on its maturity.
- ‘P’ represents the value of the amount invested through SIP.
- ‘i’ represents the compound rate of return.
- ‘n’ represents the duration of investment in months.
- ‘r’ represents the returns of the expected rate.
Let’s take an example to understand the basics of the SIP Calculator.
If a person invested in the SIP Mutual Funds of Rs. 2,000 per month for the tenure of 24 months and the expected annual rate of returns is 12%.
Here, i = r/100/12 or 0.01
Now put the variations in the value of the formula which is shown above for the calculation of the SIP amount.
FV = 2000*[(1 + 0.01) ^ 24-1]*(1 + 0.01) / 0.01
Therefore, a person will get Rs.54,486 after its maturity in the SIP Mutual Funds.
How to use SIP Calculator?
The Systematic Investment Plan (SIP) Calculator to estimate the returns of the Mutual Funds Investment is very simple to use. One must follow the easy steps given below to estimate the returns:
- First of all, one must select the frequency of its SIP.
- Then, one must enter the SIP amount which one would like to invest in.
- After that, enter the tenure period of SIP.
- At last, enter the expected returns rate.
Simultaneously, the SIP Calculator will calculate the accumulated amount which a person may receive after the end of its maturity period of the investment. Despite this, there is a comparison between the sum accumulated and the fixed deposit provided by the Mutual Funds Investment.
Advantages of SIP Calculator
The Advantages of using the SIP Calculator are given below:
- SIP Calculator helps its investor to estimate the accumulated amount invested in the Mutual Funds at the ending period of the SIP tenure.
- After estimating the accumulated amount of returns, one can plan its financial goals in a better way.
- Estimation through the SIP Calculator helps you to choose the right Mutual Funds scheme.
- If a person enters the correct SIP amount, it’s duration, and the returns of the expected rate in the SIP Calculator then it provides output as an accurate estimate of the future amount, accumulated rate of returns, and the total investment estimation.
Benefits of SIP Calculator
The main benefits of SIP calculator are:
- Simple and fast: The formula to calculate the SIP calculation seems to be very difficult and complex and the error chances are higher if done manually, however, SIP Calculator has made it all easy and fast for the investors to estimate an accurate result of its investment which allows a person to get an idea about its investment in total.
- Provides Discipline Approach: A new investor who does not have sufficient knowledge about the stock markets, In this case, SIP Calculator will help those persons by inculcating the habit of savings and by providing an estimation about its future returns.
- Rupee Cost Averaging: One can also take the advantage of the Rupee Cost Averaging through SIP as the number of its returns will be on the monthly basis and from these monthly returns, one can purchase more units of it when the price falls. Overall, the lump-sum amount is higher in comparison to the average cost of the SIP Investment.
- Favorable: The SIP Calculator is favorable to both the investors who are from good financial backgrounds and who are from low financial backgrounds as well. The reason behind it is that most of the investors develop their SIP Calculator in their Excel sheets which although make the same sense of using the online available free resources.
- Estimate The Future Goals: As the SIP Calculator provides the result in an accurate way to its new as well as experienced investors, the job becomes easy for the person to estimate the returns.
- It Provides Easy To Use Interface: The SIP Calculator has the feature of easy to use interface, as it provides its users to quickly generating results after entering only a few details about the investment.
Frequently Asked Questions
Q1. What is a Lump-sum SIP Calculator?
Ans. In the case of the single-time lump-sum payment, the final maturity amount is calculated through the Lump-sum SIP Calculator.
Q2. What work does a SIP Calculator perform?
Ans. The SIP Calculator performs the following works listed below:
- First of all, the SIP Calculator will ask you the following questions-
- The monthly amount to invest in.
- The period of investment
- The expected annual returns.
- The (inflation) option is also available in most of the SIP Calculator in case, a person would like to check the calculation as according to that also.
- The SIP Calculator will give you an answer within seconds.
- One should note the point that the SIP Calculator may differ from company to company.
Q3. Why should I use a SIP Calculator?
Ans. To understand the importance of the SIP Calculator, let’s take an example to know more about it.
Suppose, a person named Mr. Harrison who is 35 years old is a Lecturer, the main financial goals for the next 20 years of Mr. Harrison are to buy a car and a house and also save some amount for his child’s education and marriage. Therefore, to meet his goals he has invested in Bonds. But, within the time he finds that his future project based on Bonds are not sufficient to meet his future needs and will fall short to achieve his goals.
This may be due to the two reasons:
- The chances that inflation grows faster rather than the returns may drift away all his savings.
- If he might invest in Equity Investment and not in Bonds, where he might have profited to higher returns in his investment.
But the only reason behind Mr. Harrison investing in Bonds is just to play safe as it provides security and the risks are at a low level. Now, here the question arises that what he should do to achieve high returns to fulfill his requirements and future planning without being affected by the turbulence of the market? The only way to achieve this is through the SIP, and also the SIP Calculator. Mr. Harrison can arrange and estimate the future returns easily by calculating the amount by following some easy steps of calculation. Which will surely give him the confidence to grow more.
Q4. Can you give an Idea of the SIP Returns Rate of Interest?
Ans. In the case of the long-term debt-based Mutual Funds, the SIP Returns may vary from 6-9% per annum whereas, for the large-cap equities, the returns of SIP is on an average of 12-18% per annum and 14-17% per annum as the return of the mid-cap equities.