We all know how useful SIP can be for mutual fund investors with a long term investment horizon. For those who do not know, a Systematic Investment Plan or SIP is an investment tool that allows investors to save and invest a fixed sum at periodic intervals in a mutual fund scheme of their choice. The frequency at which the SIP investments are made is predetermined and so is the investment sum. Just like a recurring deposit, a SIP auto debits the predetermined sum from the investor’s savings account and lets them buy units irrespective of the existing market conditions. When you continue to invest, you are automatically saving regularly, and this investment approach might be necessary to create long term wealth or for someone to achieve their financial goal.
And to understand how much your monthly investments in mutual funds via SIP should be, investors can make use of an online SIP calculator.
How to achieve goals with an SIP calculator?
To achieve life’s short term or long term financial goals, investors need to first prioritize their goals depending on their urgency. A short term goal can be anything like renovation of your house, planning a short vacation, buying a new car, etc. Such goals can be achieved through SIP investing for a duration of 1 to 3 years and be achieved by investing a fixed sum regularly. Investors usually invest a bigger amount when they have to achieve a goal in a short duration.
For example, if you want to buy a new car that costs Rs. 15 lakhs in the next three years, as per the calculations computed by the SIP calculator a monthly SIP amount of Rs. 35000 might be sufficient for you to achieve this goal. Here, we have assumed a 12% rate of return from the mutual fund scheme.
Long term goals are usually monetary goals that require thorough financial planning. Because one might need a large corpus spanning over Rs. 1 crore or even more depending on their goals. One must also remember that they need to have a long investment horizon to achieve such a hefty corpus.
Let’s say that you want to build a retirement corpus worth Rs. 2 crores so that you can enjoy financial freedom and do not have to depend on anyone. You have 25 years in hand before you retire. After putting in the necessary details in the SIP calculator it will tell you that a monthly SIP of Rs. 15000 can help you achieve the desired retirement corpus. Here, the rate of return assumed is 10%.
Multiple simulations in a few seconds
Investors can use the online SIP calculator to derive multiple results in just a few seconds, thus saving a lot of time. If an average human had to manually compute all the results, it would be a time consuming process. Since it is such a fast and easy to use tool investors can easily change the expected rate of return, change the SIP sums and investment horizons to get different results. This way they might help you to understand whether your current SIPs are aligned with your targeted goals or whether they need to invest more.
A mutual fund SIP calculator is an ideal tool that any existing or aspiring mutual fund investor can make the most of. However, investors must understand that mutual funds do not guarantee returns, and hence, it is better to diversify their investment portfolio across asset classes.