What is a SIP Calculator and how it helps in SIP planning
What is SIP?
As you all may know, to invest in mutual funds, there are two approaches – lumpsum or one time investment and regular investments known as SIP. In SIP investment, you can choose a fixed amount which you can invest in pre-defined intervals like monthly, quarterly, fortnightly or daily. SIP mutual fund can be started with instalment of as low as Rs 500. Some AMCs allow even Rs 100 instalment. The good point about SIP is that you can invest as long as you want and there are no maximum limit of a SIP investment.
What is a SIP Calculator?
A SIP Calculator is a free online tool which gives you an idea on what returns can be expected on your SIP mutual fund investment. In a SIP investment, the maturity amount is based on your investment tenure, the expected annual rate of return, and the SIP instalment amount.
It takes a few inputs in the SIP calculator and you know how much your SIP will grow to at the end of the investment period. You need to input the following –
- The SIP amount
- The expected rate of returns
- SIP Tenure in years
In the result, you will be able to view the total invested amount, total value of your investments at the end of the SIP tenure based on the expected returns and the SIP period. However, the point to be noted here is that, the SIP calculator gives you only an estimated return, which can vary from the actual return and also that it cannot account market volatility and changes in the regulation that may happen during your mutual fund SIP investment tenure.
How a SIP calculator helps you?
A SIP return calculator is much more than a tool to know the estimated future value. Please see the points below:-
Goal Planning: It helps you estimate the amount that you need to invest through SIP to reach any of your financial goals. If you know the future amount of your goal, the SIP calculator can easily tell you how much to save monthly in order to reach that goal.
Ease of use: Through a physical calculator it is difficult to do this calculation. The online SIP calculator helps you do these in few inputs and clicks.
What the SIP Calculator does not tell you?
What is the minimum SIP amount – The SIP amount is to be decided by you. The SIP calculator will only display the result for the SIP amount you enter.
What if I have to stop my SIP – This has nothing to do with the SIP calculator. You need to write to the AMC to stop your SIP.
How the SIP calculator is different from lumpsum calculator – lumpsum calculator helps you know what would be the value of your onetime investment after the specified no. of years and expected return. It does not help in SIP calculation.Can I start a SIP in my lumpsum investment – Yes you can, by providing a mandate to the AMC along with the SIP mutual fund registration form.