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One of the best habits to get into is the habit of regular investing. An ideal investment instrument to help you stay invested with this is a Systematic Investment Plan or a SIP. This SIP calculator allows you to calculate the amount you will accumulate on your monthly investment.
SIP calculator is an online tool that calculates the return on your mutual fund investment through SIP, based on an estimated rate of return and the future value of your investment after a certain number of years.
The manual computation can be slightly labor-intensive since SIPs typically involve a monthly payment. Since the holding period for each monthly contribution would be different at any given point in time, the returns for each of these payments will differ as well.
There are 4 different types of SIPs most commonly available in the market:
1. Flexible SIP: A flexible SIP allows you to make changes to the SIP investment amount.
2. Step-Up SIP: A step-up, also called a top-up SIP, will let you increase your SIP investment amounts at fixed intervals.
3. Perpetual SIP: A perpetual SIP is an investment that continues indefinitely, meaning there is no fixed tenure or end date to your SIP investment.
4. Trigger SIP: A trigger SIP is an investment that functions based on certain trigger events that you mention. For instance, you may set a trigger that the SIP should be doubled if the NAV of a scheme falls to a certain level.
The Systematic Investment Plan calculator essentially gives investors a bifurcation of the future value of the SIP investment with two figures: the estimated return they can expect to make on the investment and the principal.
Therefore, you can use the SIP return calculator to get an overview of how your investment will grow over a certain holding period, assuming a certain rate of return and SIP contribution.
You can also factor in the effect of inflation when using the SIP calculator online, though not explicitly. You could do this by manually figuring out the nominal rate of return you’d expect to earn from your investment, based on your target real rate of return and the prevailing rate of inflation. Then, you just need to use the manually computed rate as your rate of return and enter it into the calculator to start investing in mutual funds.
Let us look at some examples to figure out how this calculator can help you.
As you know by now, the Systematic Investment Plan calculator helps you analyze three figures: your principal, the returns earned on the principal, and the future value of the investment.
It gives you an idea of how much you’d earn on your investment if you contribute X amount each month for Y number of years at a Z rate of expected return. You can plug these numbers into a SIP calculator online.
For instance, say you’re investing in your child’s college. You need ₹20 lakh at the end of five years, and you’re able to invest ₹20,000 each month starting today. You don’t mind an aggressive strategy, so you could expect to earn 12% p.a. on average over the next five years.
When you input the data into a calculator, it tells you the following:
For instance, if you want to invest a fixed amount every month for 5 years, you can calculate the future value of your investment through ET Money’s SIP returns calculator by:
The SIP plan calculator can provide you information about how much returns you’d generate and what your investment will grow to over the next five years.
In this example, for instance, it helped you realise that you can fall short of your goal by ₹3.5 lakh.
If you have a certain amount in mind that you want to invest each month, a Systematic Investment Plan calculator should be your go-to tool.
If you know how much you want to invest in Mutual Funds every month, you can use the ET Money SIP Calculator to estimate the potential future value of your monthly investments.
To use this functionality, you need to provide 3 key inputs:
If you know how much you want to invest in Mutual Funds every month, you can use the ET Money SIP Calculator to estimate the potential future value of your monthly investments. To use this functionality, you need to enter the following inputs:
After entering the above details in the Mutual Fund SIP calculator, just click on calculate to view the future value of your investments along with a short list of Mutual Funds that might be suitable to help you achieve your investment goal.
If you are planning to invest in order to achieve a specific goal such as buying a new car or arranging for the downpayment of a new house, you would already know how much money you will need. In this case, you can use the sip amount calculator to figure out the monthly SIP you need to reach your investment goal.
To use this feature of the SIP calculator, you need to provide the following inputs:
While you don’t need to do the computations manually since you can always find a SIP calculator online, it’s always good to understand where these numbers come from so you feel more confident about your investment strategy.
SIP calculators use the following SIP formula:
FV = P x {[(1 + r)n – 1] ÷ r} x (1 + r)
Where:
FV | Future value of investment |
P | Principal contributions each month |
r | expected rate of return (per month) |
n | Number of contributions towards the principal |
For instance, if you want to calculate the FV for a SIP with ₹1,000 monthly contributions for two years and an expected rate of return of 12%, this is what the formula would look like for you:
FV = 1000 x {[(1 + 0.01)24 – 1] ÷ 0.01} x (1 + 0.01)
Note that the r is 0.01 since our expected rate of return is 12% per annum, which translates to 1% per month.
Investments made into market-linked instruments such as Mutual Funds do not provide guaranteed returns. So investors might find it difficult to figure out how much their money will grow in the future or how much they need to invest to reach financial goals.
The ET Money SIP Investment Calculator helps overcome these problems and provides the following key advantages to investors:
No, most SIP investment returns are taxable. However, SIP investments in tax-saving mutual fund schemes, i.e., ELSS Mutual Funds, are eligible for tax deduction under Section 80C of the Income Tax Act.
SIP returns are market-linked. This means that the returns depend upon the performance of the mutual fund you invest in.
SIP is one of the most recommended techniques of investing in mutual funds, especially equity and hybrid funds. Equity and hybrid funds can be volatile and SIPs help smoothen out that volatility over time. With debt funds, SIPs are optional as they tend to be less volatile.
There is no limit on the amount of SIP investment. You can start with as little as ₹100 per month.
While choosing a mutual fund for SIP investment, it is important to consider factors such as the fund’s investment objective, performance across cycles, fund manager’s competence and expense ratio. You should select a fund (category) that aligns with your investment goals and has a consistent track record of delivering returns. Additionally, lower expense ratios can increase your overall returns by reducing the costs associated with investing in the fund.
There is no maximum tenure for SIPs. You can invest for as long as you want. In fact, perpetual SIPs allow you to invest indefinitely.
Some types of systematic investment plan (SIP) such as flexible SIP allow you to modify your SIP amount. But in the case of other types of SIP, once you have started a SIP, you are not allowed to modify the SIP amount during the selected investment tenure. You can however pause or cancel the existing SIP based on your investment goals.
In the case of a perpetual SIP, there is no SIP end date so, you can continue making SIP investments as long as you like without any need to extend your SIP duration. In the case of other types of SIP, you can get in touch with the fund house or the customer care team of your investment advisor to extend the tenure of your current Mutual Fund SIP.
Yes, you can use the ET Money SIP Calculator and Planner to estimate your SIP returns online. Just enter the monthly SIP amount, investment period, and expected returns into the online SIP calculator and planner to know how the estimated future returns from your SIP investment.