Numbers are involved in financial planning. When you try to understand them, you realise that they offer simple mathematical solutions to many funds problems. Numerous calculators are available that make crunching numbers simple. Among these is a SIP calculator.
What is SIP Calculator?
An online financial tool is a calculator for Systematic Investment Plans. It displays your required monthly investment concerning your desired corpus. As a result, it serves as a roadmap for you to accomplish all of your financial goals.
These SIP calculators, commonly referred to as mutual fund SIP calculators, assist in speeding up difficult financial computations. The SIP calculators are made to provide a reliable approximation of your mutual fund investments’ returns. The mutual funds’ actual returns, nevertheless, may vary.
These calculators provide you with an estimation. They cannot forecast returns based on the movement of the underlying shares’ markets. Additionally, the SIP calculation does not consider the expense ratio.
How do SIP Calculators work?
SIPs and lump sum investments in mutual funds are also options. SIP calculators and lump sum calculators are thus two different categories of online calculators. The sole difference in this instance is the lump sum calculator’s help in determining the returns on a lumpsum investment. The mutual fund SIP calculator, in contrast, forecasts the returns on consistent, systematic investments.If you are planning to take the CPA exam in the US, make sure to take the best CPA exam review for you.
Consider 10 year investment of Rs. 5000 made each month (120 months). An expected 10% annual return is for this mutual fund. When you use the SIP calculator going forward, you must enter this information. The calculator indicates a total capital value of Rs. 10,32,760 for a primary amount of Rs. 6,00,000.
Your investment principle would be Rs. 7,20,000, and the returns would rise to Rs. 12,39,312 if you wanted to increase the asset value to Rs. 6000 each month.
The “Adjust for inflation” button is another input-specific SIP investment calculator request. You can enter the anticipated inflation rate for the term of your investment here.
How do SIP Returns work?
However, it’s still a good idea to understand how these figures are calculated so you can feel more secure about your investing strategy.
SIP calculators use the following SIP formula:
FV = P x {[(1 + r)n – 1] ÷ r} x (1 + r)
FV = Investment’s future value
P = monthly P Principal contributions
r = expectation of return (per month)
n = Contributions made in a number
For instance, the calculation might seem as follows for you if you were to get the FV for a SIP with Rs 1,000 monthly payments for two years and a 12% projected rate of return:
FV = 1000 x {[(1 + 0.01)24 – 1] ÷ 0.01} x (1 + 0.01)
Since our predicted return rate is 12% annually or 1% monthly, the r is 0.01; take note of this.
How To Invest In SIP?
Choose a mutual fund to invest in
There are a variety of mutual funds available on the market. Select a fund based on your investment goals and risk tolerance. Complete the KYC process, fill out an application form, and submit it to the AMC either online or offline to begin your investment journey.
Select the investment timeframe
You must decide how long you would like to hold your investment after selecting a fund. The time duration could range from 6 months to 10 years, depending on your investing goals.
Regular investment
Choose the day of the month you want to invest in. A simple and convenient way to build long-term wealth is through SIP investments. For this reason, it’s crucial to maintain your investment during the entire investment period.
Conclusion
It’s also critical to understand that investments made through mutual funds are exposed to market risks. Investors should thus be aware of the risks and realise that the calculator only estimates the possible returns and does not guarantee those returns.