Sip Calculator

What is SIP Calculator & How does it Work

In order to be a successful investor, it is of paramount importance that investments be made in a systematic manner and this is where the SIP calculator provided by Finbasket' can play a key role. Using a SIP calculator a prospective investor can gauge the estimated earnings at the end of a specific tenure for a specific amount that is invested periodically (usually monthly). Alternately, if the investor has a fixed goal in mind such as a corpus for retirement or an emergency fund for unexpected medical expenses, using a SIP Calculator helps ensure that the investor can figure out how large a monthly investment can provide the required corpus.        

Steps to Use SIP Calculator to calculate returns on SIP Investment

The SIP calculator uses some key data such to calculate the final value of your investment. Following are the key steps that need to be followed when using the SIP mutual fund calculator.


Step 1. Input the monthly SIP amount you are comfortable with. In case of mutual fund schemes, the minimum SIP amount allowed is Rs. 500 though many schemes require a minimum of Rs. 1000 to be invested every month.


Step 2. Estimate the rate of return on your investment. This is definitely not an exact science; however, based on the track record of the fund, you can determine a probable rate of return and input that into the SIP calculator.


Step 3. The third variable that is required in case of the SIP maturity calculator is the investment tenure. This refers to the amount of time you want to continue investing. In most cases, SIP schemes have a minimum tenure of 6 months however some may require a longer minimum tenure of 12 months.


Based on the above criteria the SIP calculator for mutual fund provides a final value of your investment at the end of the tenure chosen by you. As the tool is free to use, investors can easily change any of the variables to estimate the different returns that they could receive in lieu of their investment. Currently, these calculators do not take into account either the capital gains tax you may incur or the probable inflation. Hence going forward, the next big step might well be the introduction of a sip calculator inflation option along with the plain vanilla offering.


Benefits of Mutual Fund SIP Return Calculator

  1. Helps the investor to make their investment plans fast. The formula is extremely complex and if done by hand, the results obtained are prone to error because of this complexity. Using this calculator eases the strain and helps investors get accurate results that may be used to make informed investment decisions. As soon as you have input the required details, you get results in the blink of an eye.
  2. The use of a sip return calculator in India is favoured by both those who have a financial background as well as those who do not have a financial background. This is because, though a majority of individuals can definitely develop their own SIP calculator in Excel, it is much easier to use the free resources available online.
  3. The use of an SIP calculator evens the playing field for new investors as well as for the experienced investors. The accurate results obtained from the calculator can help even new investors get benefits from mutual fund investments by helping them estimate their future returns.
  4. These calculators have an easy to use interface that has only a few variables that need to be provided into order to generate the fast and accurate results. This has been the key driver of the popularity for the SIP calculator for mutual fund leading to its promotion by multiple fund houses and brokers alike.

What is a SIP & How to invest?

SIP is the acronym for systematic investment plan and using a SIP scheme, investors can potentially invest large amounts of money without straining their monthly finances. The typical SIP scheme features a fixed amount being invested at regular intervals (usually monthly) over a pre-determined period of time (a few months or more). This fixed amount can be as low as Rs. 500, while the SIP tenure can be as short as 6 months and go on to for years. Using the SIP return calculator, an investor can easily calculate the projected earnings of each specific SIP.


In many ways, SIP is similar to a recurring deposit for mutual funds with fund houses as well as brokers promoting this type of investment strategy to help customers grow their money. The evidence of how much your investment would be worth down the line is illustrated by using the SIP investment calculator. However, unlike a recurring deposit that provides a fixed rate of return during the deposit tenure, in case of SIP, the returns tend to vary depending on a range of market factors.          


How does SIP differ from Lump Sum Investment?

In case of a lump sum investment, a large amount of money needs to be invested all at once and this can significantly strain the finances of most individuals especially if they are salaried. It is much easier for investors to set aside a small sum of money every month through SIP and invest those in the best sip mutual funds in order to generate wealth in the long term for future expenses. Additionally, in case of lump sum investment, all the mutual fund units bought would feature the same price, hence the profit/loss incurred at the time of liquidating the units will be exactly the same, on the other hand, in case of an SIP the units are bought at separate times and at separate times, hence the profits would also differ from one set of units to another.


Benefits of Investing in Mutual funds Through SIP

By investing in mutual funds through a systematic investment plan calculator, the investor can potentially receive various benefits some of which are mentioned below:

  1. There is no need to speculate and wait for markets to go down in order to get the best value for the lump sum investment. This attempt to time the mutual fund market is actually the wrong strategy and this mistake may be prevented through implementation of an SIP.
  2. As a SIP-based investment system invests the money over a period of time, the investor is unaffected by temporary market volatility. This can be evidenced by an SIP calculator which automatically averages the individual investments similar to the way it occurs in real life. This phenomenon is termed as rupee cost averaging.  
  3. The implementation of a SIP also helps people develop greater investment discipline. By inculcation of such discipline, the investor improves the determination and focus required to stay invested and make profits from investment in the mutual funds market. The smaller investment amounts in SIP are also much easier to maintain as compared to lump sum investments that need to be made otherwise.
  4. Another benefit of the longer tenure SIP investment is the ability to benefit from the power of compounding. The smaller amounts required to start and sustain an SIP enable investors to start investing in mutual funds at an early age. By starting early, individual investors tend to gain much more from the power of compounding than they would have in case they waited longer and started investing later in life.
  5. SIP investment style also allows you to automate your investments, therefore you no longer have to worry about keeping track of your investment every time. You can easily issue a bank mandate or an ECS standing instruction in order to convenient keep investing in the scheme or schemes of your choice.   


 Difference between the SIP Calculators Offered by Various Fund Houses/Brokers?

The popularity of mutual funds especially tax saving ELSS funds has led to increased interest among investors who understood relatively little about mutual fund investments. In order to attract more investors and increase their interest in mutual funds, many fund houses introduced SIP calculators simultaneously and gave them different names. Some of the more popular ones include UTI sip calculator, Reliance sip calculator, Axis sip calculator, Value Research SIP calculator and Birla sun life sip calculator. However, all of these work on the same basic formula hence, their results are comparable. Therefore don’t be misled by names such as sip calculator bluechip or equity sip calculator as they work on the same principle.    

Types of Investments in Mutual Funds

It is important to note that SIP is not the only type of systematic plan when it comes to investing or even liquidating your mutual fund asset. The following are some of the other types of systematic plans:


Systematic Transfer Plan (STP): This is ideal for investors who are invested in multiple funds at the same time. The STP option allows such investors to transfer a portion of their investment into a different fund. By this method, investors gain the opportunity to move their investment from a low-return option to a high return option or from a high risk fund to a low risk fund. The use of an STP method to liquidate your investment bit by bit also ensures that the returns thus gained are reinvested into a different scheme. Just like SIP, an STP thus promotes financial discipline which is the key factor in ensuring returns that support the investor’s future needs. In order to gauge the extent to which an investor can gain through a STP, they can use a SIP calculator to get the projected earnings in case of each type of mutual fund.


Systematic Withdrawal Plan (SWP):  The entire premise of investments is to help your money grow so as to maintain financial security for the future and an SIP calculator helps you plan for such future expenses. However, it might not be a good idea to liquidate an entire chunk of investments as a lump sum, therein is the importance of the systematic withdrawal plan (SWP). In case of an SWP, the investor gets the option to periodically liquidate a portion of the mutual fund investment in order to meet landmark expenses. Such landmark expenses of one’s life includes down payment on a new house, son/daughter’s education, son/daughter’s marriage and so on. It is only natural that if an entire block of investments is liquidated such as the total amount obtained exceeds the requirement; the investor often ends up spending the surplus on unnecessary expenses. A SWP scheme reduces this risk of impulsive and expenditure, so that the investment can grow further be used for even further.        


Why Choose Finbasket's for Your SIP Investment?

Finbasket's is your one stop shop for various types of mutual fund investments. We have tie ups with major fund houses that operate in India and our services are provided to you at no cost whatsoever. Additionally, you can benefit from the recommendations of our in-house investment advisors so that you can make investments that give you the biggest bang for your buck. Additionally, you need not worry about your KYC as we will handle those details for you, Just need to fill some details for mutual fund EKYC and then you can also check KYC status and after completing the process you can invest in mutual funds. Our online investment platform allows you to easily compare and choose the mutual fund or mutual funds that suit your specific requirement before you set up a SIP. And as always you can easily use a SIP calculator to estimate the value your investment in the future before you make your decision.