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SIP Calculator: Plan Your Investments Better

By   /  June 28, 2023  /  Comments Off on SIP Calculator: Plan Your Investments Better

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Individuals who intend to invest via a Systematic Investment Plan (SIP) should learn what to expect from such an investment strategy before pouring their money into it. SIP is often deemed a lucrative investment route due to its feature power of compounding, which allows one to accumulate a corpus over a tenure. 

However, individuals must understand the expected returns they may earn on their mutual fund investment using SIP to determine if the corpus aligns with their financial objectives. While investors can use the SIP formula and manual formula to calculate returns, using a SIP calculator would prove quick, hassle-free, and more accurate.

SIP Calculator in a Nutshell

Essentially, a SIP calculator is a financial tool that enables people to estimate the projected returns on their regular SIP investments. The online investment calculator takes into account the amount of money invested, the rate of return on the invested sum, and the frequency of investment to avail an estimate of the expected returns.

The SIP calculator offers quick results based on the specific variables entered by the users to estimate returns. The financial tool is automatically fed with a compound interest formula, which makes it easier to compute the compounding interest effect and helps determine the returns instantly.

SIP Calculator Formula

The SIP calculator uses the following formula to help users ascertain the returns on their invested money.

FV = P [ (1+i)^n-1 ] * (1+i)/iFV

Sign What it stands for
FV Future value or  maturity value
P The amount of money invested via SIP
i Compounded interest rate
n Investment duration in months
r Expected return rate

Example of SIP Calculation

Nikita wants to build a corpus over 24 months, so she decides to invest Rs. 2000 every month via SIP mutual fund. She expects to accrue returns on the invested sum at the rate of 12% annually. 

Based on the formula the compounded interest rate  would be

(i = r/100/12)  

= 0.01.

As per the formula, 

FV = P [ (1+i)^n-1 ] * (1+i)/iFV

FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01

Hence, SIP returns on maturity would be Rs 54,486.

However, investors can skip the hassles of manual calculations altogether and remove the chances of calculation errors by using a SIP return calculator online.

How to Use SIP Calculator?

One can easily access the SIP calculator online and use the tool in a few simple steps.

Step 1: Open a reliable SIP calculator

Step 2: Enter your intended investment amount

Step 3: Enter the investment tenure

Step 4: Enter the rate of returns you expect to earn

Step 5: Enter the frequency of investment, i.e., monthly, quarterly, or half-yearly you are comfortable with

After all these steps are completed, individuals can ascertain the maturity amount and returns on investment. All the details and more will appear on the screen. 

Why Should You Use SIP Calculator?

There are several features and benefits associated with SIP calculators that simplify the calculation process for users significantly.

For instance, individuals can benefit from using a SIP calculator in these ways:

Easy to access and use: The simple design of SIP calculators allows individuals to use them without any confusion. The tool’s simple design and minimal variable requirements help users determine their returns on investment without possessing any additional information.

Saves time: SIP calculators provide results instantaneously, i.e., as soon as the key investment details are fed into the investment tool. The quick results not only save time that would otherwise not be possible in manual calculations but also ensures users avail of accurate answers. 

Facilitates effective financial planning: SIP calculators allow multiple readjustments of investment details for free. This feature allows users to ascertain which combination of principal amount, tenure, and frequency of compounding would yield an ideal outcome that aligns with their investment goals. In turn, such a feature helps plans investments better so that users can ace their goals smoothly without straining their immediate financial standing.

Besides these, the SIP calculator helps keep an objective approach toward investment by offering them an idea about the returns they could actually generate within a given timeframe. However, the same tool may not come in handy when estimating the returns of other investment options such as ULIP, fixed deposits, etc. In such cases, individuals can use a ULIP calculator and determine the returns on investments quickly.

Tips to Maximize Returns on Investment via SIP Calculator

By following these easy tips and using the SIP calculator one can easily maximize the returns on investment:

Tip 1: Increase the investment amount

By increasing the investment amount, individuals are more likely to get more units of any given mutual fund scheme. Such a strategy will help generate higher returns. However, one must account for their current financial capacity before they decide to boost their investment so that the move doesn’t strain their immediate financial standing.

Tip 2: Increase your investment tenure

A longer investment tenure helps build a higher corpus. This is because of the Power of the Compounding interest feature of SIP that helps the investment options to unlock their yielding potential and help build a strong corpus in the long term. However, to make the most of the Power of Compounding it is crucial to stay invested for a long time and avoid withdrawing funds prematurely.

Tip 3: Opt for a high-yielding investment scheme

Long-term investment in a high-yielding fund can help generate considerable profits. Typically, a  well-performing investment scheme is more adept at yielding higher benefits. This is why, staying invested in a long-term investment option like SIP for a long term helps build a corpus and spread out the risk of investment. However, it should be noted that any investment-related decision should be based on the prevailing market conditions, one’s risk appetite, and the funds’ overall performance.

Besides these investors should determine the frequency of compounding interest. Investors can easily find out if SIP compounding monthly, quarterly, half-yearly, or annually would be most suited for their investment plan. They can easily determine the same by using a SIP calculator. 

Hence, individuals can benefit from a SIP calculator in these ways and plan their investments in mutual funds accordingly. 

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