Plan Your Investment With SIP Calculator

Systematic Investment Plan (SIPs) is undoubtedly a popular pick to route investments in mutual funds. The investment route allows investors to park small amounts of money at regularly predefined intervals. In addition, the power of compounding SIP helps investors to grow their returns over time and accumulate wealth.

However, to make the most of SIPs, investors must follow well-thought-out investment strategies. One way to begin is through the strategic use of an online SIP calculator. The investment tool can help individuals estimate potential returns from mutual funds, determine the best investment timeline, and compute the principal investment they need to route through SIP to reach their goals.

SIP Calculator – In Brief

A SIP calculator is essentially a free online investment tool that helps estimate the potential returns from a mutual fund routed via a systematic investment plan. The tool weighs factors such as principal investment amount, interest rate, investment timeline, and compounding frequency to compute potential returns.

SIP calculators come loaded with a mathematical formula that calculates investment returns within a couple of seconds, based on the user’s input of their best investment plan. SIP calculators are convenient to access, simple to use, and free for all, helping investors make quick and informed decisions about their investments.

SIP Calculator Formula

FV = P [ (1+i)^n-1 ] * (1+i)/iFV

Here,

FV =  Estimated amount

P = Principal amount

i = Compounded rate of interest

n = Investment horizon (in months)

r = Rate of return

Let’s put the formula to the test with this example –

Suppose Medha plans to build a corpus in 24 months. She plans to put Rs. 2000 in mutual funds each month through SIP, hoping to earn a 12% return pa. Hence, as per the systematic investment formula –

FV = P [ (1+i)^n-1 ] * (1+i)/iFV

FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01

The compounded rate of interest is 0.01 (i = r/100/12) 

By the end of 24 months, Medha will earn around. Rs. 54,486.

One can use the same formula to compute the returns on funds through SIP. However, the process would be lengthy and filled with mistakes. This will not offer them accurate numbers. Individuals can save this manual labor and eliminate the room for any errors by simply using an online SIP calculator.  Since the tool is free and allows one to make multiple adjustments to investment inputs, one can compare different combinations and returns and pick one that is most profitable. This way the tool can help individuals to improve their investment planning and strategize their market moves.

Steps to Use SIP Calculator Online

Before using the SIP calculator it is advisable to determine one’s investment goals and identify one’s limitations in terms of principal investment and risk-taking appetite. Having an idea of the same will help them understand whether the results displayed on the tool actually meet their plans or not.

Follow these easy steps to use the SIP calculator online for free –

Step 1: Visit the official website of a reliable investment or financial company

Step 2: Navigate to the SIP calculator page

Step 2: Open the calculator

Step 3: Enter crucial investment details

Step 5: Enter investment frequency, i.e., monthly, quarterly, or half-yearly

Once the information is shared, the online investment tool will display the estimated returns on mutual fund investment via SIP. Within a couple of seconds, the tool will offer a complete breakdown of the interest earned, maturity amount, and more.

Benefits of the Online SIP Calculator

The key benefits of SIP calculator include –

Easy to use

The online SIP calculator is smart, simple, and very easy to use. One does not really need to be tech-savvy or have in-depth knowledge about SIP to use the tool. The online calculator has a user-friendly interface that needs users to enter just a few information, such as principal investment amount, investment frequency, investment tenure, and expected interest rate. Above all, users can access the tool and compute SIP results free of charge.

Saves time

SIP calculators eliminate the need for manual calculation and are loaded with an SIP formula which automates the entire process, saving investors a lot of time. The tool displays estimated returns on SIP based on the information the user shares. In addition, users have the flexible option to adjust their investment variables of the SIP calculator to compare top mutual fund investments and select the best-suited option as per their investment goals.

Facilitates financial planning

An online SIP calculator is a valuable investment tool for comparing SIP options as it enables users to readjust investment variables multiple times, such as principal amount, compounding frequency of rate of returns, and investment horizon. This helps determine the best suitable investment variables that will provide them with inflation-adjusted returns that help them meet their financial goals. The tool also provides insights into how their selected plan will influence their immediate financial situation, particularly their budget.

However, investors should note that SIP calculators only help determine the estimated performance and scope of SIP mutual funds. This means it does not help determine specific outcomes of other investments or financial products. For instance, FD holders cannot use it to determine FD returns or taxpayers cannot use it to determine tax liabilities. They would have to use the FD calculator and tax calculator, respectively to determine their specific queries and outcomes.

Individuals can make the most of this tool to improve their investment and financial planning. For instance, they can increase the intended principal investment amount in SIP as and when their financial standing is supported. They should consider picking a longer investment tenure to reap the benefits of the power of compounding by earning interest on interest. In addition, they should use the tool to understand how the frequency of compounding can influence SIP returns and use the same to streamline their investments. Through this individuals can develop a smart approach to their SIP investment and generate substantial earnings to build a robust corpus.