Benefits of using SIP Calculator

There are different types of investment schemes out there, each with varying degrees of risk return ratio. Investors often focus on the returns and ignore risk only to be surprised by their investments underperforming in the future. It is essential for investors to invest in a scheme looking at its risk profile and also consider investing in it only if the investment objective and investment horizon of the scheme aligns with that of theirs. One way to ensure that you are able to create long term wealth is by starting a Systematic Investment Plan in mutual funds. Depending on the scheme, investors can choose a low investment sum (sometimes as low as Rs. 500 per month) thus controlling their exposure to the various markets and asset classes in which the fund invests. Since mutual funds are open-ended schemes that offer active risk management, the money that you invest is carefully handled by the fund manager and invested keeping in mind market vagaries.

A lot of retail investors prefer SIP over lumpsum as it is known to offer several benefits in the long run. To ensure that investors are able to achieve their set financial goals by accumulating a commendable corpus, investors must make sure that they are regularly investing adequate sums in mutual funds. For that, investors can use the SIP calculator which is an online tool that can help them compute these exact details.

What is an online SIP calculator?

Investors who wish to target certain long term financial goals like building a retirement corpus, securing their child’s financial future, or building an education corpus for their higher studies or any goal that needs financial planning, can use the SIP calculator. 

The free online SIP calculator is based on the following formula:

M = P × {[(1+i)n-1] / i} x (1+i)

Where –

• ‘M’ is the total sum that you receive upon maturity
• ‘P’ represents the sum you invest at periodic intervals
• ‘n’ refers to the number of monthly SIPs you have made during your investment journey
• ‘i’ is the periodic rate of interest

Here are a few benefits of using an online SIP calculator: 

The SIP calculator computes accurate results

Investors must be accurate when taking calculated risks with their investments and the SIP calculator is on point when it comes to that. All that investors have to do is enter a few basic details like their monthly SIP investment amount, investment horizon, and the expected assumed rate of return. The SIP calculator will display the total invested sum, assumed interest earned and total maturity amount (total investment + assumed interest earned).

Provides results in a jiffy

For a normal human to calculate what the SIP calculator does, it might take a lot of time as these calculations are complex and time consuming. The calculator comes with three different calculations where one tells you about the total amount invested, the second tells about the interest earned and the third one shows the total amount earned that includes the investment sum and assumed interest earned.

SIP calculator allows investors to make an informed investment decision

Since investors can forecast multiple investment scenarios using the online SIP calculator, it becomes easier for them to make an informed investment decision. For example, if you were only investing Rs. 10,000 per month in a mutual fund via SIP to reach a goal that requires you to invest Rs. 15,000 instead, the SIP calculator can tell you the same. Investors can change the investment horizon, invested sum, and the assumed rate of return for the SIP calculator to produce various results in just a few seconds.

Investors will know which SIP works better for them

Every mutual fund scheme offers a different rate of return. This interest rate is based on the mutual fund scheme’s past performance. Investors must understand that the past performance of the scheme cannot be sustained. However, investors can input the assumed rate of return of several mutual fund schemes to determine how much returns they can earn in the tenure invested.

However, the SIP calculator doesn’t take certain factors like, the expense ratio of the mutual fund scheme or exit load, into consideration while computing returns. Also, the returns displayed by the SIP calculators are only estimated and may vary from the actual returns. 

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.