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SIP Calculator, Systematic Investment Plan Calculator, Invest in SIP

SIP Calculator, Systematic Investment Plan Calculator, Invest in SIP

SIP Calculator
Frequency
SIP Amount
Expected Return per Year
%
Investment Duration
Yr
Total Value 0

SIP Calculator

What is SIP Calculator?

How to calculate SIP returns? The answer is an online SIP (Systematic Investment Plan) calculator. SIP Calculator is an online tool that helps you calculate the return on your SIP investments. The calculation is based on the following inputs

  • SIP amount: The amount that you invest in each time period. It can be as low as Rs 100 or can go upto Rs 10 lakhs.
  • SIP frequency: The time gap between 2 successive investments. It can be monthly, quarterly or half yearly.
  • Expected return per year: The return that you expect to get from your investments. On the conservative side, the long term average return from equity in India is 10%.
  • Investment duration: The time period over which you invest. It is prudent to stay invested for a longer duration say, 5 years or more in order to achieve reasonable returns.

On the basis of the above inputs, the SIP calculator gives you the result in a matter of seconds. Calculating the return on SIP investments is a tedious process as you are investing a sum of money at regular intervals over a stipulated time period. The process is simplified by the online SIP calculator.

How does SIP Calculator work?

SIP Calculator uses the following formula

P [(1+i) ^n-1] x (1+i)/I

  • • P: SIP amount
  • • i : Expected rate of return per frequency period that is, monthly/quarterly/half-yearly
  • • n: Number of installments that is, Investment duration x frequency that is, monthly/quarterly/half-yearly
  • An example of how SIP calculator works
  • Assume that you wish to invest Rs 10,000 every month for 10 years. You expect a return of 12% per year from equity investment. In this case, the total corpus that you will accumulate after 10 years is Rs 23.23 lakhs. If, however, you increase investment to Rs 15000 every month, you will accumulate Rs 34.85 lakhs. You may tweak the input data in order to see your desired corpus.

What is SIP?

SIP or its acronym Systematic Investment Plan is an option designed by mutual funds, allowing you to invest a small sum in the stock market on a regular basis. The main advantage of an SIP is rupee cost averaging. SIP enables you to purchase more units when the market is low and fewer units when the market is high. This helps in lowering the average cost per unit. Besides, SIP helps in magnifying the return on your investment through the power of compounding. The trick is to start early.

What are the advantages of investing through SIP?

The advantages of investing through SIP are as follows

  • I. Rupee cost averaging: Investing through SIP helps in rupee cost averaging. By buying more units when the market is low and fewer units when the market is high, SIP helps in reducing the average cost per unit.
  • II. Power of compounding: Compounding allows your investment to grow exponentially. Compound return is the return on return gained over a period of time. It is an effective way to increase your wealth multifold. In order to reap the benefits of compounding fully, the trick is to start investing early.
  • III. Instills discipline: SIP makes you disciplined. By investing diligently over a long period, one builds a large corpus at the end of the investing period.
  • IV. Mitigate risk of bad market timing: By committing to regular investment through SIP, one can reduce the risk of bad timing in entering or exiting the market.
  • V. Riding through volatility: Equity markets are inherently volatile. They move up and down due to a combination of factors like government policies, corporate profits, global markets, interest rates etc. SIP helps you overcome market volatility. In SIP, you get more units when the market is low and fewer units when the market is high. This helps in optimizing the return on your investments while mitigating the downside risk.

What are the types of SIP?

There are primarily four types of SIP namely

  • Top-Up SIP: In this case, you can increase the SIP investment amount by a fixed amount at pre-defined intervals. This is also called Step-Up SIP. Compared to fixed SIP, top-Up SIP helps in getting a larger corpus at the end of the investment period.
  • Flexible SIP: A flexible SIP gives you the flexibility to alter the investment amount. For instance, in the event of a cash crunch, you may decide to lower the investment amount. Similarly, in case you receive a bonus, you may increase the investment amount.
  • Perpetual SIP: In the case of Perpetual SIP, the investment duration is not pre-defined. Normally, the investment is made for 1 year, 3 year, 5 year etc. However, when the investment duration is not set before hand, it becomes a perpetual SIP.
  • Trigger SIP: This allows users to change SIP investment amount at pre-defined triggers. The triggers are either based on index levels or when the value of your investment breaches a certain threshold. For instance, if the index falls by say 2%, the SIP amount is debited automatically.
Frequently Asked Questions
How to invest in SIP?
You can start an SIP by selecting a mutual fund or stock where SIP mode of investment is permitted. Identify an asset based on your investment goals and risk appetite. Once the asset is identified, decide your investment duration. Ideally, investment duration should match the goal duration. Investing regularly is paramount as adhering to it helps in achieving the goal.
Can SIPs help in meeting financial goals?
SIPs (Systematic Investment Plans) helps in achieving your financial goals like child's education, expenses for marriage, buying a house, creating a corpus for a secured retirement life, etc. However, it is prudent to start early in order to minimise the investment amount needed to achieve your goals.
How to become a Crorepati through SIP?
The key to reaching the goal of becoming a Crorepati is to start early. So, start your SIP today. The early you start the more you benefit. If you are 20 years old and you want to accumulate Rs 1 crore by the time you become 60, you just have to invest Rs 1,581 per month to accumulate this amount. For calculating this, we have assumed a return of 10 per cent per annum.
What is the minimum investment in SIP?
The minimum investment in most mutual funds is as low as Rs 100, which enables small investors to purchase this option.
Can I pause my investments in SIP?
You can pause your investments in SIP by filling the SIP pause facility form and submitting the same at the branch of the AMC (Asset Management Company) or any of its Registrars offices. Investor needs to mention the SIP pause start date and SIP pause end date in the form. SIP restarts immediately after the SIP pause end date. If the SIP tenure is completing during the SIP pause date, the SIP will be auto terminated.
Is SIP tax free?
No, SIP returns are taxable. However, SIP in tax saving mutual funds called Equity Linked Savings Scheme (ELSS) will give you tax benefit under section 80C of the Income Tax Act.
Do SIPs give you guaranteed returns?
No, returns from SIPs are market linked. Hence, they don’t give you guaranteed returns.
Can I modify my SIP amount?
SIPs like Flexible SIP gives you the option of modifying the SIP amount. However, in the case of normal SIPs, top-Up SIPs, this facility is not available.
How long can I invest in SIP?
You can invest in SIP for as long as you want. There is no predefined time limit. Perpetual SIPs give you the option to continue SIPs indefinitely.
What factors should I consider while selecting a mutual fund for SIP?
There are multiple factors like investment objective, fund’s consistency in generating excess returns over benchmark index, its performance across bull and bear markets, expense ratio etc which needs to be considered while selecting a mutual fund for SIP. Consistency in delivering excess returns aka Alpha across market cycles is a sign of a good performing fund.
How can I calculate the returns from SIP?
You can use the online SIP calculator for calculating the returns from SIP. Just provide the amount that you want to invest, investment duration, frequency of investment and the expected return per year. Based on the inputs, the SIP calculator will give you the returns from your SIP investment.
Is SIP good for all types of investors?
SIP is good for any type of investor. However, the benefits of SIP are realized the most when it is initiated early. Hence, it is prudent to start investing in SIP at an early age.
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