Investing is one of the best methods to stockpile wealth and protect your financial future. Even though the market offers a wide range of investing options, Systematic Investment Plans (SIPs) have grown in popularity over time. SIPs are a well-liked investing option in which participants put money into their accounts in fixed amounts on a monthly, quarterly, or annual basis.
Investing in mutual funds through SIPs has become an increasingly popular investment option, particularly among millennials. To assist potential investors in making informed investment decisions, SIP calculators estimate the returns on mutual fund investments made through SIPs.
What is a SIP Calculator?
A SIP calculator is a valuable tool that enables investors to calculate the returns on their mutual fund investments based on their assets' quantity, duration, and expected yearly returns. Based on these inputs, the SIP calculator will estimate the future value of your investments. Using a SIP calculator can help you plan your investments better.
One of the most significant advantages of using a SIP calculator is that it is incredibly efficient in automatically computing complex financial calculations so that investors do not spend hours manually calculating investment returns. The tool is also user-friendly, making it accessible to more investors.
How does the Sip Calculator work?
The SIP calculator is a relatively simple tool to use. First, you must input the money you want, and the period you wish to invest it. You then need to select the investment type you want to make. This investment could be in stocks, mutual funds, or fixed-income instruments like bonds.
Once you fill in these details, the SIP calculator will calculate the investment's potential returns. This calculation is based on the rate of return for the acquisition, the investment horizon, and the frequency of contributions.
The rate of return is the rate of growth investors can expect from the investment over the specified period. The investment horizon is how long the investor wishes to invest, and the frequency of contributions is how often the investor will make payments into the investment account.
Sip Calculator Working Example
Suppose you want to invest Rs. 5,000 monthly for ten years in a mutual fund with an average return of 12%. Then, using a SIP calculator, you can find out the future value of your investment.
Assuming that the mutual fund will continue to provide an average return of 12%, your investment of Rs. 5,000 per month for ten years will grow to approximately Rs. 11.58 lakhs.
To understand how the SIP calculator works, you can use the following formula:
FV = P [ (1+i)^n-1 ] * (1+i)/i
FV stands for future value.
P = the amount you invest through SIP.
i = the compounded rate of return.
n = the investment duration in months.
r = the expected rate of return.
Benefits Of The SIP Calculator
Here are some benefits of using a SIP calculator:
1. Accurate and immediate results
SIP calculators provide quick and accurate results of the future value of your investments, saving you time and effort from crunching numbers.
2. Easy to Use
SIP calculators are easy to use, and anyone can operate them with minimal knowledge of finance. You only need to input a few details about your investment, and the calculator will provide you with the estimated returns.
3. Helps in planning your investments
A SIP calculator helps you plan your investments by providing an estimated return on your investment based on the amount and duration of the investment.
4. Enables informed decision-making
With the help of a SIP calculator, you can make informed investment decisions by quickly determining the amount you need to save to achieve your investment goal.
5. Provides flexibility
A SIP calculator allows you to experiment with different investment amounts, frequencies, and durations to find the best plan that suits your needs and goals.
6. Helps in comparing investment options
A SIP calculator enables you to compare the returns of different mutual funds and make an informed decision.
7. Helps set achievable financial goals
A SIP calculator can help you set achievable financial goals by calculating the required investment amount and duration to achieve them.
SIP Calculator is essential for any investor looking to invest through SIP. It helps you make informed investment decisions, plan your investments better, and provide a more efficient roadmap to your financial goals.
You can compare different investment options using a SIP Calculator. You can also assess the impact of varying investment amounts, frequency, and terms.
By providing accurate data, your SIP calculator can help you make better investment decisions, leading to better outcomes and greater certainty. So why not try it and discover how it can help your financial success?