A SIP or systematic investment plan is a popular investment method in India primarily because it multiplies your wealth and promotes the habit of savings and investors amongst investors. It is ideal for small investors who want to invest a small amount of money monthly instead of a lump sum in mutual funds. An investor may choose to invest every week, monthly or even quarterly. This fixed amount is invested to buy certain units of financial assets number at the current rate in the market
With the help of a mutual fund SIP calculator, an investor can choose to compute the absolute value of an investment after a certain span of time. An investor needs to provide information regarding the invested amount, the investment period, and the return rate. It gives a clear estimate of the amount you will be earning on the investment after a the pre-determined investment period.
Image source: Shutterstock
How to Use the mutual fund SIP Calculator?
The steps involved in using a mutual fund SIP calculator are as follow:
- Investors need to provide details on the monthly amount they can invest in a systematic investment plan. The minimum amount invested in mutual funds is INR 500 per month.
- The mutual fund SIP calculator calculates the estimated returns based on the rate of returns from the specific investment scheme. To derive the potential return rate, it is important to analyze a certain figure based on the fund’s track record.
- The last step in the process requires the investor to provide details of the investment tenure. The minimum tenure of investment in a systematic investment plan is six months. It is, however, recommended that an investor makes a long-term SIP investment to gain better returns which can be calculated with the help of the SIP calculator.
- The mutual fund SIP calculator is easily available online and is provided by most fund houses. You only have to log into the fund house’s website that you desire to invest in and then search for a SIP calculator.
- You can use the SIP calculator for free. You also decide how much to invest to meet your savings and investment goals by changing the variables in the calculator.
- The user must keep in mind that the output accounted is for after the anticipated rate of inflation, and capital gains tax is considered.
- A lump sum calculator can also be used to determine the investor’s maturity amount for a one-time investment scheme like Fixed Deposits (Know what is fixed deposit here). The lump-sum calculator, however, requires the investor to provide details on the total number of investments. In addition, the estimated rate of return and the investment tenure is used to calculate the total amount due by the end of the tenure.
The Advantages of a SIP Calculator
Now that we understand what a SIP calculator is and its function, we can now look at the benefits of the mutual fund SIP calculator:
- The mutual fund SIP calculator is simple to use. It enables a quick process to derive the returns accrued against the smaller monthly investments made in SIP. An investor can strategically make an investment plan to meet long-term financial goals as well.
- There are no extra details apart from the details about your monthly investments, the return rate on the fund invested and the investment tenure. The interface is user-friendly and can even be used by individuals who are not well versed with technology.
- The mutual fund SIP calculator is easily available online and is free of any charges. The SIP calculator makes it easy for first-time investors.
- The Systematic Investment Plan is the most dependable investment instrument on which the majority of the small investors depend to mobilize small savings to meet future financial goals. Invest in SIP today and be assured of meeting your future financial goals.
On a Parting Note
There are many reasons one must consider investing in SIP as established in the article. Given the fact that there are fewer risks involved in SIP as compared to the other types of equity investments, it can be considered a balanced investment.
Nevertheless, you should be a smart and well-informed investor if you are investing in Mutual funds. You can read through SEBI’s list of FAQs related to mutual funds to get a grasp of how mutual funds work, and the important terms associated with them.