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+91-9797971876SIP Calculator
The SIP calculator is a useful tool that will help you calculate the returns on investments in investment tools like mutual funds. SIP or Systematic Investment Plan is the process of investing a fixed amount of money in regular intervals in instruments like mutual funds. The intervals at which you can invest money can be a weekly, monthly and quarterly basis
How Does an SIP Work?
After you apply for an SIP plan, a fixed amount of money is deducted automatically from your bank account and the same amount gets invested in your chosen financial instrument (usually mutual funds). Based on the Net Asset Value (NAV) of the chosen instrument, the number of units of the instrument (equivalent to the amount) will be allocated to you. The entire process of money deduction to the allocation of the purchased units is done in a single day.
When your chosen amount is deducted from your bank account, the equivalent units are added to your account as per the market rate. Every time you invest, the reinvested amount becomes bigger and bigger and along with it your returns on those investments. Let us understand how SIPs work with the help of an example. We will also discuss the formulae to calculate the value of your SIP investment.
SIP Calculator Formula
SIP Calculator Formula
M = P × ({[1 + i]^n – 1} / i) × (1 + i).
Where:
M is the amount you receive upon maturity.
P is the amount you invest at regular intervals.
n is the number of payments you have made.
i is the periodic rate of interest.
Suppose you want to invest INR 100 for 24 months at a periodic interest rate of 10%, then the monthly return would be 0.004%. (10/100 × 24).
Plugging in the values:
M = 100 × ({[1 +0.004]^24 – 1} / 0.004) × (1 + 0.004)
So, M = 2523.76.
However, you must be aware of the fact that SIP interest fluctuates as per market conditions. The estimated return might be more or less than your assumptions based on the then market conditions.
How to Calculate SIP Returns?
Investkraft’s SIP calculator is a unique and mathematically correct tool that you can use to calculate your SIP returns. You can also use the calculator to find out how much capital you need to invest in an SIP to obtain your financial goals. Try the simple steps below to find out now:
- Select “SIP”
- Enter a value in the “Monthly Investment Amount” section
- Adjust your expected rate of interest
- Select a time period and click on the “Invest Now” tab
What are the Benefits of an SIP?
Investing in an SIP rather than in a lump sum has several benefits as discussed below:
- Rupee Cost Averaging Similar to Dollar Cost Averaging, it means averaging out the cost of investment over a while when investors invest small amounts of money regularly
- Beneficial in the Long Run SIPs allow individuals to invest regularly over time, taking advantage of the power of compounding for exponential growth.
- Managed by Professionals: Trained professionals manage mutual funds who have been in the industry for a long time. They help investors achieve their financial goals through informed investment decisions.
- Diversified Investment Through SIPs, investors can invest in a wide range of financial instruments. It not only reduces the risk of losses but also helps balance the portfolio.
- Investment Flexibility: SIPs offer a lot of flexibility in terms of investment duration, frequency and amount. SIPs in India are available for a nominal amount of 500 rupees as well.
- Convenient in Investment: SIP investments are not as time-consuming as manual investments. Since the predetermined amount is automatically debited from the linked bank account, investors do not have to actively manage their investments
- Disciplined Approach Towards Investment SIPs encourage investors to set aside a certain portion of their funds on a weekly, monthly or quarterly basis. This disciplined approach can prove to be very helpful for investors wishing for long-term financial success. This approach also helps investors reap the benefits of compounding.
- Emergency Fund SIPs can act as an emergency fund because they are without any tenor. Investors are free to withdraw their money without the fear of monetary loss.
FAQs on SIPs
A: AMC SIP is called an Asset Management Company Systematic Investment Plan through which a SIP is set up with a mutual fund’s asset management company. There is no intermediary in AMC SIP.
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