What is an SIP return calculator?
An SIP calculator is an online tool to calculate the future value of your investment into a mutual fund using a Systematic Investment Plan option. SIP, as we know, is a systematic investment plan where a small amount of money is invested at regular intervals into a mutual fund scheme. Over time, this invested amount accumulates into a large corpus due to the power of compounding. The SIP calculator helps to calculate the value of such investment using a compound interest formula. Manual calculation of the SIP investment is quite a difficult process. Hence this online calculator makes this task easier.
How does a SIP calculator help?
In order to achieve your short, mid or long-term financial goals, you should first make an investment plan and then start your investments. Your plan should be suited to your investment horizon and the corpus you need to build to finance those goals. An online SIP calculator can put a value to your investment projections by helping you to calculate your SIP returns.
How can you find the returns on your mutual fund SIP using a calculator?
Investing in a mutual fund through systematic investment plan (SIP) is easy and a very convenient option. By investing a small amount as low as Rs 500 each month in an SIP you can build considerable wealth due to the power of compounding. The interest on your investments is calculated on a compounded basis as you deposit a fresh amount each month which is again compounded. The calculation of these compounded returns is a very cumbersome exercise if done manually or even with the help of a manual calculator or an excel sheet since you would need to do this for every year that you will invest. Even putting a formula in excel is not as convenient as finding the returns expected from your mutual fund investment using the online calculator.
To solve this problem, you can use a free SIP calculator available online to calculate the returns from your SIP investments.
For example, say you want to save up Rs 2.5 crores for your retirement planning. Let us say you are 32 years old, and you want to retire at 60. This leaves you about 28 years to accumulate that amount. Using an online SIP calculator, you can calculate the returns from your investment and adjust the SIP investment amount to reach your retirement corpus goals.
There are certain details you need to put in the calculator like your target amount, the number of years you want to stay invested, the regularity of your investments, and the expected returns on your mutual fund investment. The SIP calculator will then calculate the SIP returns and help you decide on the amount that you should invest in order to reach your goal.
A mutual fund distributor or a financial advisor will be able to help you decide on a mutual fund scheme after taking into account the calculations put forth by the online calculator.