Things You Must Know About a SIP Calculator Before Investing

SIP Calculator

There are many misconceptions about investment these days. Several people get confused about how and where to invest, how much to invest, and whether they will earn returns. More or less, investment options are vast in this day and age, and you can find investment channels that match your personality and financial goals. Today, all investment activities can be done online, and this compels potential investors to make decisions about investment in an informed manner, from the comfort of their homes. A SIP, or a systematic investment plan, is a great vehicle for investing in mutual funds, and with a tool, the SIP calculator, you can compute your returns and know where you stand with such an investment.

A SIP Explained

Before you venture to use a SIP calculator, you should know what a SIP is and how it benefits you as an investor. SIP is an acronym that stands for “Systematic Investment Plan”. As the name suggests, this scheme lets you invest your capital in a regular manner in mutual funds. However, in contrast to a regular mutual fund where you have to cough up a lump sum for investment, a SIP lets you invest your capital gradually, at intervals that suit you.

A SIP calculator is an online tool that can help you to know how much to invest, considering your time horizon, and give you an idea of potential returns on investment. A SIP calculator is convenient and its ease of use draws investors, even seniors, to the ease of investing in a SIP. SIP investment is an organised way to invest capital, and when you may not have large sums to invest in one go, such a plan may suit you. A SIP is also good for small investors or those just beginning their investments in mutual funds.

The Working of a SIP

When you decide to invest in a SIP, you should know that a certain sum of money will be debited from your bank account on a monthly basis. This will be invested in your SIP. This is not only a convenient and versatile way to invest but brings the concept of discipline into investment. It’s a good way to make your money work for you, rather than you spending it, as it is automatically debited and invested. Over a specific span of time, your investment grows and you see good returns. When investing, a SIP calculator can aid you in your investment decisions, regarding the sums to be allocated.

The SIP Calculator

The SIP calculator is an electronic simulation that permits investors to gauge returns on any mutual fund investments made through the vehicle of a systematic investment plan. Lately, more millennials have been using the SIP calculator to estimate their returns with a SIP calculator. Anyway, before you use the online SIP calculator to know about how to go about investing, you should be aware of what the calculator can do to help you. The online SIP calculator is available for you to use free of charge at any online portal of an AMC (asset management company). It is chiefly designed to provide future investors with a heads-up in their mutual fund investing. However accurate you think the online calculator may be, you can only get an idea of returns from your investment and not a definite solution. This is because the actual returns you may get from your mutual fund investment may vary, and are dependent on several factors. Furthermore, the SIP calculator does not consider the expense ratios (if applicable) and the exit loads to do with investment. It is simply an online instrument that gives you a rough idea about the amount of a SIP to reach your financial aims, according to an expected return rate.

Know the Working of a SIP Calculator

Once you decide to invest in a SIP, you can use the online SIP calculator to formulate your investment plan. The first thing to do is to access the calculator on any online platform of your choice. You have to enter the following information in the applicable fields and then the calculator will do its work:

  • The amount of your investment
  • The frequency of your investment
  • The expected returns (the rate expected)
  • The duration of investment

The online SIP calculator works according to the formula of compound interest.

What does the calculator tell you?

The online SIP calculator helps you to choose your preferred SIP. It can show you your investment’s value after a fixed tenure. All you have to enter is the amount you wish to invest as a SIP installment, the expected return rate (according to past data on the mutual fund invested in), and the total investment period. The calculator then digitally computes the value of your investment at the close of the tenure of any particular SIP. You can enter in different values for SIP installments, just to find out how different amounts give you returns on investment. According to your unique financial goals, you will know how much to invest in a SIP, and at what installments, to finally fulfill your financial goal.

Using the SIP Calculator Helps You

The goals of investors vary as much as the amounts to invest differ. However, at the end of the day, every investor seeks portfolio diversification as a way to meet financial goals. Investors may want to invest for the short run or the long haul. Some may want a corpus for their retirement. All in all, if you have an apt financial tool at your disposal your investments can be planned, and many online calculators help you do this. For instance, you may want to opt for mutual funds according to your unique risk tolerance. What is the ideal investment amount for you? You can decide this via the use of a SIP calculator.

Besides your tolerance for risk, your investment goals matter and you may be opting for a SIP to fulfill a specific financial goal such as investing in your child’s further education. You may want to know, for instance, how much of a return (based on your investment) you can get for a specific term, like a 10-year period, that you need funds in. This is where a SIP calculator enters the picture and removes the confusion that may be caused while investing in a SIP.