SIP Calculator – Systematic Investment Plan Calculator Online

    These days young investors do not want to invest in conventional investment avenues like their parents and grandparents. They seek other investment options that may not guarantee returns but have the potential to generate far better capital appreciation than bank fixed deposits and public provident funds. Mutual funds are a great investment tool that allows retail investors to generate capital appreciation over the long term. These are market-linked schemes that predominantly invest in equity and equity-related instruments of publicly listed companies and across various money market instruments like government bonds, company fixed deposits, debentures, treasury bills, etc.

    Mutual fund investors have the option of either making a lumpsum investment or opting for a Systematic Investment Plan. Systematic Investment Plan or SIP is an effective investment model that allows retail investors to save and invest a fixed sum periodically in mutual fund schemes. All an investor has to do is complete all the reinvestment formalities, decide on the monthly investment, and decide a date on which they wish to invest. After this, every month on a fixed date, a predetermined SIP sum is debited from the investor’s savings account and electronically transferred to the mutual fund.

    Mutual fund investors who wish to start their investment journey by starting a SIP in mutual funds can also refer to the SIP calculator, a free tool that is easily available online. Let us find out more about this free calculator and how investors can use it to their advantage.

    What is a SIP calculator?

    As mentioned earlier, the SIP calculator allows investors to estimate the total returns that they will receive at the end of the SIP investment journey. Investors must understand that these are just approximate returns and original returns can vary. The SIP calculator doesn’t consider the expense ratio while showing the results.

    How does the SIP calculator work?

    The online SIP calculator is based on the following formula:

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

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

    Where –

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

    How to use the SIP calculator?

    SIP calculator can be goal-based or it can be based on the amount an investor wants to invest and see how much wealth they can create in the long run.

    If you are using a goal-based calculator:

    • Input the corpus that you want to achieve
    • Input the number of years/months you have in hand to achieve that corpus
    • Input the expected rate of return

    The calculator will show the SIP sum that you need to start investing regularly to achieve that corpus over the stipulated period.

    For example, if you wish to build a corpus of Rs. 10 lakhs in the next 5 years to achieve one of your financial goals and you expect the mutual fund scheme to deliver an average annual return of 8%, a monthly SIP of Rs. 13,160 should be enough for you to achieve that goal.

    Now if you want to use the SIP calculator to find out how much wealth you can create you need to input:

    • The amount that you can invest per month
    • The number of years/months you wish to invest this amount
    • Expected rate of return

    The SIP calculator will show your initial investment sum and the wealth that you will create.

    For example, if you invested Rs. 5000 for 1 year and with an expected rate of return of 12%, your invested amount will be Rs. 60,000 and the total wealth created will be Rs. 63,413.