SIP Calculator – Analyse financial goals & calculate return on SIP

To invest in mutual funds, one can either go with the lumpsum investment option or they can opt for a Systematic Investment Plan (SIP). A lumpsum investment is usually made by the investor at the beginning of the investment cycle and they can buy units in large quantities at the scheme’s current NAV (Net Asset Value). On the other hand, a Systematic Investment Plan doesn’t require investors to receive large investment sums. They can invest small fixed sums at periodic intervals and create wealth over the long term.

If you are planning on investing in mutual funds via SIP, you can now draw and estimate your overall returns using the SIP calculator, a simple and easy-to-use online tool. A SIP calculator is designed in such a way that any layman can use it to their advantage.

What is a SIP Calculator?

A SIP calculator is a free online calculator which can tell investors the maturity amount that they will receive through their SIP investments made in mutual funds. A SIP calculator is popular among mutual fund investors who are investing by making regular and systematic SIP investments. This calculator allows an individual to draw an estimate on the returns which he or she will be earning at the end of their SIP investing journey.

Since this calculator can only draw estimated returns, the actual returns may vary depending on the expense ratio of the schemes in which you invest. The SIP calculator doesn’t take into consideration the expense ratio or exit load (if applicable) while estimating returns.

How does a SIP Calculator work?

A SIP calculator normally works on the following formula –

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

Where –

M represents the amount you receive upon maturity

P represents the amount you invest at regular intervals

n represents the number of payments you have made

i represents the periodic rate of interest

How to use the SIP Calculator?

There are a few basic details which investors need to enter for the SIP calculator to come out with results. They need to –

  • Enter the SIP sum which they will be investing or are currently investing every month
  • They need to enter the number of months / years in which they will be investing this sum (for example, 60 months or 5 years)
  • Finally, they need to enter the expected rate of return in percentage which the mutual fund scheme
  • might deliver during their investment tenure (for example 8%, 12%)

There are some online SIP calculators which may ask investors to enter the total sum which they want to collect over a specific investment horizon and then suggest the SIP sum which they need to invest regularly to achieve that goal.

Analyze goals before using SIP calculator or starting SIP in mutual funds

A lot of first time mutual fund investors who are excited to begin their investment journey often make a rookie mistake that can be avoided, investing without any specific goal. Having a clear perspective on why you are investing a particular amount will only allow investors to ensure that they are committed to their SIP investments till their investment objective is accomplished.

Investors who know which financial goal they want to achieve with SIP in mutual funds may also be able to use the SIP calculator more productively than others. You don’t want to start a SIP that will only take you halfway towards your financial goal and for this, it is better to have a realistic goal that can be achieved through systematic investing.