SIP Calculator – Calculate SIP Returns & Invest in SIP

    When we are investing our hard-earned money in investment products, we are keen to find out how much corpus we can earn at the end of our investment journey. By figuring out the total estimated capital gains, investors can determine whether their investments are sufficient to nurturing their life’s short-term or long-term financial goals. Similarly, when it comes to mutual fund investments since these are market-linked schemes whose returns fluctuate from time to time investors want to know how much wealth they can create.

    Investors who start a SIP in a mutual fund scheme can use the SIP calculator to determine the total returns (approximate) one can earn over a stipulated period. Today we are going to discuss the SIP calculator and how investors can use it to their advantage to calculate SIP returns. But before that, let us understand what SIP is.

    What is SIP?

    A systematic Investment Plan (SIP) is a simple and easy way to invest small fixed sums in mutual fund schemes. A retail investor does not need to have a large sum to invest in mutual funds via SIP. Some mutual funds even allow investors to invest an amount as low as Rs. 500 per month through SIP. An investor can either start a SIP in mutual funds or can make a one-time lumpsum investment. A lot of investors opt for SIP over lumpsum because it allows them to buy more units over time and averages out their cost of purchase.

    The following example might help you understand how the SIP in mutual fund works –

    Suppose you want to collect Rs. 15 lakhs to send your child abroad for higher studies when they turn 18. Let us assume that your child’s current age is 8. This means you have 10 years in hand before you need the money. Assuming that the mutual fund scheme will deliver an average 8% annual return, a monthly SIP of Rs. 8200 will help you to build the education corpus over the course of the next 10 years.

    Now that we are quite clear on the concept of SIP, let us move ahead to the SIP calculator?

    What is a SIP calculator?

    As its name suggests, an online SIP calculator is a free online tool that any layman can find and use without any technical difficulties. It gives SIP investors an estimate of the total returns they can earn through their monthly SIP investments. However, while calculating the total returns, the calculator doesn’t take the mutual fund scheme’s expense ratio into consideration.

    Here’s the formal on which the SIP calculator is based:

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

    Where –

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

    As mentioned earlier, these are just estimated figures and investors should bear in mind the actual returns may vary depending on the performance of the mutual fund. Also, one should consider inflation while calculating returns as this will give them a better understanding of the value of their corpus at the time of redemption.

    The best way to earn returns with mutual funds is by starting a SIP. SIPs are flexible which allows investors to start or stop their SIP investments anytime. SIPs can inculcate the discipline of regular investing and new investors who are new to financial planning should consider opting for SIP in mutual funds.