A systematic Investment Plan is among the most preferred options to route investment in mutual funds. Features like the flexibility to mobilize small investments at regular intervals and the power of compounding on generated returns make it a lucrative avenue. However, to make the most of these features, individuals need to follow the best investment planning strategies. To begin with, they can use financial tools like a SIP calculator to determine the estimated returns, suitable timeline, and investment amount in their best investment plan.
Let’s find out more about the SIP calculator and it helps in investment planning.
What is an Online SIP Calculator?
SIP calculator is a free online investment tool that helps investors estimate the returns on a systematic investment plan. The tool considers several factors such as investment amount, rate of earnings, investment timeline, and compounding frequency of the returns, to calculate the SIP returns.
SIP calculators are pre-loaded with a formula to compute the returns on investment within seconds of feeding the required details about their best investment plan.
What makes them most appealing is that the calculators are a convenient and simple tool that helps investors make informed investment decisions for free.
SIP Calculator Formula
The calculator is pre-loaded with this formula –
FV = P [ (1+i)^n-1 ] * (1+i)/iFV
FV is the estimated amount
P is the principal amount
i is the compounded rate of interest
n is the investment horizon (in months)
r is the rate of return
Example of SIP Amount Calculation
Suppose Sukriti plans to save a corpus in 24 months. So she decided to mobilize Rs. 2000 monthly in mutual funds through SIP, hoping to generate a 12% return annually. Hence, based on the systematic investment formula –
FV = P [ (1+i)^n-1 ] * (1+i)/iFV
FV = 2000 * [(1+0.01) ^24 – 1] * (1+0.01)/0.01
Here the compounded rate of interest is 0.01 (i = r/100/12)
At the end of the investment tenure, the SIP would yield Rs. 54,486. Notably, the manual process of calculating the SIP maturity amount is quite lengthy as the process involves multiple steps. The lengthy process makes a manual calculator prone to calculation errors and offers inaccurate results. Thanks to the online investment calculator individuals can skip these hassles and determine the estimated returns accurately and within seconds.
How to Use an Online SIP Calculator?
Follow these easy steps to use an online SIP calculator and shape your best investment plan accordingly –
Step 1: Look for a reliable financial or investment website featuring investment plan calculator
Step 2: Check whether it has a SIP calculator
Step 2: Open the SIP calculator
Step 3: Enter the required investment details
Step 5: Feed details like investment frequency, i.e., monthly, quarterly, or half-yearly
Once these easy steps are followed, the free investment tool will showcase the expected returns on investment and maturity amount within a few seconds, with a proper breakdown. Individuals who already have a clear idea about their investment requirements and financial goals will be able to use the tools to identify whether the returns match their expectations or not.
Features and Benefits of the Online SIP Calculator
The key benefits include –
Easy to use and free access
Online SIP calculators are designed to be smart, simple, and easy to use, even for beginners. The tools typically come with a user-friendly interface that requires one to enter only a few basic information, such as their intended investment amount, anticipated investment frequency, investment timeline, and expected rate of return. Above all, users can easily access their SIP results online in seconds, free of charge.
Online SIP calculators can save investors a lot of time by automatically calculating their returns on investment based on the information they share. The availed eliminates the need for manual computation, which is often time-consuming and error-prone. Additionally, users have the option to adjust the variables of the calculator to compare mutual fund investments and find the best-suited option for their needs.
Facilitates proper financial planning
SIP calculators are considered a valuable tool for comparing investment options, as they allow individuals to readjust multiple variables, such as investment period, principal amount, and compounding frequency. This feature helps users determine which combination of investment variables will offer them inflation-adjusted returns that could be adequate to meet future financial goals.
In addition to facilitating investment planning, SIP calculators provide insights into how the proposed investment plan will impact their current financial situation.
However, it is crucial to note that online SIP calculators are not suitable for determining the anticipated returns of other popular investment options, including ULIPs, PPFs, and fixed deposits. To find their returns on investments, users must look for dedicated tools designed for each investment type.
Effective Tips to Boost Returns on Investment through an SIP
Follow these tips to develop and make the most of SIP and enhance your investment planning –
Tip 1: Increase the amount you plan to put into mutual funds through the SIP route
Tip 2: Try to pick a longer investment tenure to avail yourself of the benefits of the Power of Compounding SIP returns
Tip 3: Make it a point to stay invested in the SIP route for a long time
Tip 4: Invest your money into high-yielding fund schemes to build a robust corpus faster
Tip 5: Use the investment calculator to understand which compounding frequency works best for you and your financial plans
These smart tips can help individuals plan their investments in mutual funds via SIP as per their goals and financial standing. However, one should note that investing more than one can afford will burden the financial capacity and defeat the ease of the investment option to generate returns. Picking the best investment plan only after checking its features, benefits, and limitation will help shape financial plans and approach to investing and facilitate better savings. Individuals are advised to assess the performance of their funds frequently and reallocate their resources in funds accordingly.