 Investment

# Make the Best Use of SIP Calculator What is a SIP Calculator?

Be it a scientific calculator, or a normal calculator, or any other type of calculator. The goal is to make life easy for the user and to compute the results way faster and save the time of the user. Similar is the case with the SIP calculator. An online SIP calculator is an easy-to-use tool that computes results in a jiffy. If you had to make these calculations which the SIP calculator does with a pen and paper, it would consume a lot of time. The SIP calculator computes such complex calculations using a predetermined formula and displays results within no time.

You may know a thing or two about the SIP calculator by now. But do you know what SIP stands for? Let us find that out as well.

A Systematic Investment Plan or SIP as it is commonly referred to as is one of the two ways to invest in a mutual fund scheme (the other being lump sum investment). A lot of young investors take the SIP route instead of lump sum investing as this way they can save and invest a fixed sum from their monthly income and make it a habit. To inculcate investment discipline, SIP is a must.

Coming back to the SIP calculator. This free online calculator is based on the following formula –

M = P × ({[1 + i] n – 1} / i) × (1 + i)

In the above mentioned formula  –

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

How to make the best use of the online SIP calculator?

There are two primary ways in which the online SIP calculator works. Say you want to know how much returns your current SIP investments in a particular scheme might help you fetch over the course of the next few years. You can put these details in the SIP calculator to derive the necessary.

Let us assume you want to invest Rs. 10000 every month in a mutual fund scheme for the next five years to build a corpus for your medium term financial goal.

In the SIP calculator, enter –

• Monthly SIP sum – Rs 10000
• Investment horizon – 5 years / 60 months
• Assumed rate of return – 10%

The SIP calculator will compute and show the following –

Total amount invested over the course of the investment horizon – Rs 6 lakhs

Total corpus earned (invested sum + interest earned) – Rs 7.74 lakhs

There’s another way in which the SIP calculator works as well. So if you have a figure in mind but you do not know how much your monthly investment should be, the SIP calculator can help you with that as well.

Let us assume that you want to build a retirement corpus of Rs. 1 crore. The expected rate of return is 8 percent, and you have 150 months in hand before you retire.

In the SIP calculator, enter –

• Total corpus needed – Rs 1 crore
• Investment horizon – 150 months
• Assumed rate of return – 8%

The SIP calculator will compute and show the following –

• Monthly SIP sum needed to achieve the corpus – Rs 39003
• Total invested sum – 58.50 Lacs

Investors can do multiple calculations with the SIP calculator to derive to multiple results and can easily plan their investments accordingly.