One of the best strategies to achieve decent returns on an investment is to invest in mutual funds using the SIP method. Using an SIP calculator, you can estimate the amount you need to invest regularly to achieve your financial objectives.
What is an SIP calculator?
An SIP calculator is a straightforward tool that enables people to estimate the returns on SIP-based mutual fund investments.
Before investing, the SIP calculation is essential. You need to enter the numbers. The outcome will enable you to calculate a better investment strategy and determine whether you will make the desired profits. This formula is used in the SIP calculation:
FV = P × ((1 + r)n – 1) / r) × (1 + r)
FV: Future Value or maturity amount
P: Principal amount invested through an SIP
r: Anticipated return rate
Suppose you want to invest Rs. 1,000 every month for a year at an assumed interest rate of 12%.
Future Value = 1,000X ([1 +0.01]12 – 1 / 0.01) x (1 + 0.01)
Future Value = Rs 12,809 per year
The interest rate on an SIP will vary depending on the state of the market. The expected returns could change depending on whether it rises or falls.
Benefits of using an SIP calculator
You must evaluate your existing financial situation, carry out financial planning, and set goals for the future. Goal setting helps you achieve financial security and directs your existing financial assets in a way that will produce returns over time that will enable you to reach your desired goals. You can use the calculator to get an idea of how much you will need to contribute through SIPs to reach your goal.
Estimate maturity amount
Using the SIP calculator, you can estimate the potential returns at the end of your investment period. Knowing how much you hope to make at the end of your investment period aids in determining the monthly investment amount.
Using an SIP calculator is easy and it produces the results in a jiffy. All you need to do is add your SIP amount, expected rate of return, and the tenure for the calculator to display instant results with no error in accuracy.
Steps to use the SIP calculator
- Enter the SIP amount that you want to invest in. The minimum SIP amount for mutual funds is Rs 100 in some cases but it is generally Rs 500 for a majority of mutual funds.
- Depending on the fund’s past performance, you can estimate the expected rate of return on your investment and add that into the calculator.
- The investment tenure, which specifies how long you intend to keep investing, is the final element needed. The minimum term should generally be at least six months.
Before selecting an investment plan, you can check your strategy using an SIP calculator. To design the ideal SIP that boosts your money, a systematic investment plan calculator is usually helpful. You can create the ideal systematic investing system with the aid of this calculator.