Last Updated on March 9, 2024 by Ali Hamza
A methodical and disciplined approach for investing in mutual funds is made possible by the SIP, or Systematic Investment Plan. SIPs are a fantastic method to invest for long-term financial objectives like home ownership, education savings for children, and retirement planning. An online tool called a SIP calculator aids investors in calculating the anticipated returns on their SIP investments in mutual funds.
A SIP calculator aids in the systematic and rigorous planning of investment strategies. To determine the expected returns on investment, the SIP calculator takes into account several variables, including the amount invested, the duration of the investment, the projected rate of return, and the frequency of the contribution.
Process of using SIP calculator:
- A SIP calculator computes predicted returns on investment using a mathematical formula. The calculator’s formula accounts for the amount invested, the time period of the investment, the predicted rate of return, and the frequency of investments. The compound interest formula, on which the formula is based, determines both the interest earned on the initial investment (principal amount) and the interest earned on the interest that is generated by the investment.
Importance of SIP calculator:
- Investors should use a SIP calculator to help them plan their investments since it encourages greater discipline and systematisation. Investors can use it to estimate their expected returns on investments and make wise investment choices. The SIP calculator also enables investors to comprehend how their investment portfolio will be affected by adjustments to their investment amounts, investment terms and predicted rates of return.
Advantages:
- Aids investors in creating better organised and disciplined investment plans.
- Gives precise and trustworthy information on the anticipated returns on investments.
- Aids investors in understanding how their investment portfolio will be affected by changing investment amount, investment tenures, and predicted rates of return.
- Enables investors to decide on their investments wisely based on the estimated returns that have been calculated.
- Helps investors keep an eye on their money and adjust their investment strategy as needed.
A SIP calculator is fairly easy to use. One can use the SIP calculator by following the instructions below:
- Visit the SIP calculator page on any financial or mutual fund website.
- Enter the SIP investment amount one wants to make.
- Next, choose the investment tenure, which might be five, ten, or more years.
- Enter the investment’s anticipated rate of return. The past returns of the mutual fund scheme might be used as a guide.
- Choose whether to invest regularly on a monthly, quarterly, or annual basis.
- To obtain the anticipated returns on your investment, click calculate.
In conclusion,
A SIP calculator is a crucial tool for investors who want to make SIP investments in mutual funds. It aids in the systematic and rigorous planning of investment strategies. To determine the expected returns on investment, a SIP calculator takes into account several variables, including the amount invested, the duration of the investment, the projected rate of return, and the frequency of the contribution. Investors can utilise the dependable and user-friendly SIP calculator tool provided by 5paisa to make smart investment choices.
