Making Sense Of Mutual Fund Returns With Sip Calculator: A Step-By-Step Guide

Mutual funds can make you rich if you have a planned investment strategy. You can choose to invest a lump sum amount or go for SIP if you don’t have a lot of money right now. A mutual fund SIP calculator can help you understand the possible outcome of your investments. This online tool uses an estimated rate of return and the investment’s future value to calculate the return on your SIP investment. The returns for each of these contributions will vary because each monthly contribution’s holding duration would vary at any given time.

SIPs make you a disciplined investor. The most popular SIPs on the market fall into four categories. You can use a mutual fund SIP calculator to calculate the outcomes of every category.

  1. Flexible SIP- You can adjust the SIP investment amount with a flexible SIP.
  2. Step-up SIP- You can increase your SIP investment amounts at predetermined intervals by using a step-up, also known as a top-up SIP.
  3. Perpetual SIP- A perpetual SIP is one that never ends; therefore, there is no set duration or completion date for your SIP investment.
  4. Trigger SIP- An investment that uses a trigger SIP is one that is based on the trigger events you specify.

What is SIP Calculator?

The SIP Calculator additionally informs you how much you need to invest each month to reach your goal corpus.

SIPs, or Systematic Investment Plans, are one of among the most commonly used methods to invest in mutual funds. SIPs help in the growth of financial castigations and the build-up of wealth for the future.

How can a SIP calculator help you?

The mutual fund SIP calculator divides the future value of the SIP investment into two numbers, the expected return on the investment and the principal.

Therefore, you may use the SIP return calculator to gain a general idea of how your investment will increase over a specific holding term.

You can implicitly consider the impact of inflation when using the online SIP calculator. You may do this by manually calculating the nominal rate of return you would anticipate from your investment. It is based on your intended real rate of return and the current rate of inflation. To begin investing in MFs, you only need to utilise the manually calculated rate as your rate of return and enter it into the calculator.

Let’s look at a few scenarios to determine how you can benefit from using this calculator.

Example of using the SIP calculator:

Three numbers, your principal, the returns generated on your principal, and the investment’s potential future value, are analysed with the help of the SIP calculator.

You can get an idea of the return on your investment from it. It assumes you made contributions of Rs. X per month for Y years at a Z% projected return. These values can be entered into an online SIP calculator.

Consider the case of funding your child’s college education. At the end of five years, you will need Rs. 20 lakh, and you can start investing Rs. 20,000 now. You don’t mind using an aggressive approach, so you may anticipate making 12%.

When you enter the data, the calculator shows the following:

  • Principal invested- Rs. 12 lakh
  • Gains- Rs. 4.5 lakh
  • Future value- Rs. 16.5 lakh

The SIP plan calculator tells you how much you’ll earn in returns and how much your investment will increase over the next five years.

For instance, in this case, it made you recognise that you could fall short of your objective by Rs. 3.5 lakh.

Advantages of SIP calculator:

  • Immediate results- Finding out how much your investments will be worth in the future is now easier than ever. This calculator consistently produces rapid and accurate results based on your inputs.
  • Easy to understand and use- You don’t need to be a maths genius to determine your investment requirements because the SIP Calculator is incredibly simple to use. Additionally, it is cost-free, unrestricted in its usage, and provided by some top-notch financial companies.
  • Helps you make informed investment decisions- Planning your investments is essential if you are saving for a certain objective. To determine how much you need to save to achieve your investment objective with the least amount of effort, use the SIP Calculator.
  • Find best investment options- Some calculators also give you a list of funds that could be able to assist you in achieving your financial objectives. You may choose the SBI Consumption Opportunities Fund to grow wealth.
  • Adjust your results for inflation- Everything increases in price over time due to inflation. The majority of SIP calculators in India are unable to give you numbers that have been adjusted for inflation. With the best calculator, all you have to do is click a button to obtain the results adjusted for inflation for your investment objectives.

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