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SIP Calculator: To Calculate Your Mutual Funds Return

Personal Finance Calculator 23-11-2022 | 5 mins read

Mutual funds wanted their investors to have an investment plan which was maintained in an organised manner. Hence, they came up with systematic investment plans (SIP). You have to invest a certain sum within defined time intervals. SIP investments are easy to use and perfect if you are a risk-averse investor. No extra charges are charged, and it does not come with the stress of share market volatility. The plan can also be discontinued any time the investor wants to. With the help of a mutual fund SIP calculator, you can also know the amount you will receive on maturity.  

SIP is available to all types of investors. You can start with an amount as low as Rs.500. However, you must make regular payments. Based on your chosen plan, you can have weekly, monthly, quarterly or annual payment due dates. The SIP return calculator considers the principal amount along with the number of instalments that you have paid. You can find the SIP calculator easily available online for free.

Benefits Of the SIP Return Calculator

Here are some of the ways in how SIP calculatorsare extremely useful for you as an investor:

  1. Simplicity: The SIP calculators are very easy to use. You just have to find one online, put in the inputs that are required and you will be presented with the return result quickly. After knowing your return from SIP, you can move forward to planning the other investments that will be required to meet your financial goals.
  2. Less Information Required: To calculate your return through the SIP calculator, you just need to put in the amount along with the frequency of payment and the rate of return. The calculator will give you your return based on that.
  3. Free Of Cost And No Confusion: You get to use these mutual funds SIP calculators for free. Also, if you are a new investor, these calculators will not confuse you as they require direct inputs and give direct results.
  4. Quick Results: SIP return calculators do not take any time to function the equation and give you an immediate answer. You will get your results within a few seconds only.

How the SIP Return Calculator Works

The mutual fund SIP calculator works in a very simple manner.

Inputs Required

  • The amount that you have to keep paying in instalments. SIP investment can start with any amount that is equivalent to Rs.500 or more. However, in other investments, Rs.1,000 is the minimum required investment amount.
  • The total number of instalments. SIP starts with a minimum period of 6 months and can be extended up to a long period. Long periods give higher returns. So, you can choose the tenure according to your requirements.
  • When you choose your SIP plan, you will get to know about the return that you will be receiving on it. So, the last input for the SIP calculator would be the rate of return on your SIP investment.

SIP return calculators can also help you determine the amount and number of instalments required if you are aware of the total amount of money you want from the investment after a stipulated period. Another thing that you should note is that the resultant figure from an advanced SIP calculator takes the expected rate of inflation or capital gains tax into account.

Formula Used In Mutual Fund SIP Calculator

FV= P x {[(1+r) n -1] /r} x (1+r), where,

  • FV is the future value of your investment.
  • P is the amount you pay at respective intervals.
  • r is the rate of return in periodic terms.
  • n is the total number of payments you have made in the entire tenure.

Even though it is not required for you to know this formula, it helps in building investor confidence. If you know about the inputs and the working of the formula, you will be satisfied with the result that the SIP calculator will give you.

SIP Calculator- A Practical Example

Question

Suppose you invest Rs.1,000 per month for a year (12 months). Calculate the amount that you will be receiving on maturity. The rate of return on your SIP investment is 12%.

Solution

FV= P x {[(1+r) n -1] /r} x (1+r), where,

  • P= Rs.1,000
  • r = 12%/12= 1%= 0.01
  • n= 12

So, FV= 1,000 x {[(1+0.01)12 -1]/0.01} x (1+0.01)

= 1,000 x [(1.1268-1)/0.01] x 1.01

= Rs.12,809 approximately.

Note: These figures are just an example. Market interest rates keep changing with time and inflation.

How Can You Invest In SIP Online

The steps to invest in SIP online are:

  1. Keep The Required Documents Ready: You would require your pan card, address proof, a cheque, and a passport-size photo to get started. It is not essential to use your Aadhaar card. However, you can use it to simplify the process. A good internet connection will be beneficial.
  2. Complete Your KYC: Use the basic information required and comply with the KYC norms as an investor. It can be done online for time-saving.
  3. Use The SIP Calculator: If you want to choose a plan based on the return, use the SIP return calculator to know about it and then choose the plan.
  4. Start Investing: After you are done calculating your return, start with your first instalment payment, and your SIP tenure will begin.

Final Words

A safe investment like SIP can be very beneficial because you can estimate your return as well. However, make sure that your payments are made on time. If you do not pay 3 instalments at a stretch then your SIP will get cancelled. Use a SIP calculator to know how much you can earn if you invest today!

For more such articles, visit Piramal Finance.

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