We all save and invest so that we are able to improve our existing financial status in the near future. Sometimes we are not sure about where our investment journey will take us and hence are disheartened and may even give up mid way. But the truth is that only those who are determined to continue investing in a systematic and disciplined manner are destined to get closer to their ultimate financial goal. One of the best ways to ensure that you continue to invest for an investment horizon spanning over 15 to 20 years or more is through a Systematic Investment Plan.
Also referred to as SIP, a Systematic investment plan is a simple and effective way to save and invest a fixed sum periodically in market linked schemes like mutual funds. What SIP does is that it gives the investor the liberty to choose an investment sum that he/she is comfortable investing with and then lets them invest this sum in a mutual fund scheme of their choice till the investor’s investment objective is accomplished. There is no lock-in period involved which means investors can liquidate their SIP investments on any business day and expect the money in their registered savings account within a few days. If you invest in liquid funds, investors may expect the money in their account within 24 hours.
For investors who aren’t sure about how to use SIP as a tool to create long term wealth with mutual funds, such investors can use an online SIP calculator.
What is a SIP calculator?
As mentioned earlier, a SIP calculator is a free online tool that any layman can use by putting in a few details. You need not be a seasoned mutual fund investor to use the SIP calculator. Even a first time investor can use this SIP which is known to have many benefits. Before starting a SIP in many mutual funds schemes the investor must estimate the total returns which he or she may earn at end of their investment journey. And the SIP calculator can help them with these calculations. Why spend hours doing manual calculations about your potential SIP returns when the SIP calculator can do the same job for you in just a few seconds?
Why should mutual fund investors use the SIP calculator?
Here’s a simple example the emphasizes the importance of using the SIP calculator before starting one’s mutual fund journey –
Assume that you want to buy a house for which you to make a down payment of Rs. 5 lakhs. You want to make the down payment in the next twenty-four months but don’t know how much to invest in a mutual fund scheme so that you are able to achieve this financial goal
You can use the SIP calculator by entering the below details –
- The total corpus required – Rs. 500000
- Total number of months you have in hand before you need that sum – 24 months
- Assumed returns – 10%
The SIP calculator will compute and show–
- The monthly SIP needed to earn the total corpus Rs. 19000
- Estimated returns earned through systematic investing Rs. 50769
- The total value of your investment – Rs. 506679
With the use of the SIP calculator, you were able to find out the exact sum which you must invest regularly so that you have enough corpus to make the down payment and buy your dream home.