Nowadays, you can easily calculate SIP return online using several portals. You can use a SIP calculator to determine the returns on your regular SIP investments. Enter the information, and the answer will be readily available. You can quickly get a rough estimate of the SIP returns and invest in the best SIP plan.
What is a SIP?
SIP, or the systematic investment plan, is a method for periodically investing a certain amount of money in mutual funds. SIPs, or systematic investment plans, are essentially a way to invest in mutual funds without making a significant contribution. You can invest weekly, or quarterly, or monthly using SIPs.
Different types of SIPs
There are four varieties of SIPs on the market today:(1)
- Flexible SIP – You can modify the SIP investment amount.
- Step-up SIP – It enables the SIP amount at predetermined intervals.
- Perpetual SIP – There is no set duration or finish to the investment.
- Trigger SIP – It operates depending on a few possible trigger events that you indicated.
What is a SIP Calculator?
Using the SIP calculator, you can simulate the return on mutual fund investments made through a SIP. For millennial investors, mutual fund SIPs are a well-liked investment strategy. SIP calculators are to inform potential investors about current investments in mutual funds.
However, the real return from the mutual fund program fluctuates depending on several factors. The SIP calculator does not consider the exit load or expenditure ratio. It is an online tool that determines the SIP amount necessary to help you reach your financial objectives based on an anticipated yearly return.
The way a SIP calculator functions
The values that users enter into a SIP plan calculator make it operate.
The SIP Calculator compares the returns provided by mutual funds and fixed deposits. You must enter the investment amount, buying frequency, investment length, and anticipated returns.
The returns on mutual funds are due to compound interest. The compound interest formula serves as the basis for the design of the SIP return calculator.
With the help of this formula, you may comprehend how a SIP calculator functions. (2)
FV = P [ (1+i)^n-1 ] * (1+i)/iFV = The future value or the amount you receive upon maturity
P is the amount you put into a SIP.
I equal the compounded rate of return.
n = number of months invested
Expected rate of return, or r.
Consider a monthly investment of Rs 2,000 for 24 months.
You anticipate an annual return of 12%. (r).
I equal r/100/12, or 0.01
FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01
You will receive Rs 54,486 upon maturity.
The interest rate on a SIP will vary depending on the state of the market. The expected returns could change depending on whether they rise or fall.
Also read – What is Compound Annual Growth Rate, and How is it Calculated?
Why would a SIP calculator be useful?
It assists you in developing sound money management skills and a saving habit that will be useful to you in the future. You can calculate the SIP returns online, showing the estimated returns you earn after the investment tenure. A SIP calculator has the following advantages:
- It helps you decide how much you wish to invest.
- It gives you information about your overall investment.
- It provides an expected return value.
Conclusion
One of the best financial options is making mutual fund investments via SIP. Using this method, you can choose your monthly investment, investment tenure, and frequency. You can use the SIP calculator to estimate the expected returns on your investments, which will assist you in determining how much money to invest based on your income, needs, and preferences.
