SIP or Systematic Investment Plan is being considered as the disciplined way to invest in money market instruments and mutual funds. SIPs are periodic, they can be weekly, monthly or quarterly and investors can choose to start with investments as nominal as Rs. 1000 per month.
The great thing about SIPs is that these are flexible and can be altered or wound up at any point in time if the investor so chooses.
The SIP Calculator
SIP calculator enables investors to estimate their returns on their periodic investments over a period of time at a particular rate of return. The rate of return is the return of the mutual fund chosen by the investor, for example, SBI Blue Chip Fund is at present offering a return of around 12.5 % and some MFs are really offering very high return rates like the Mirae Emerging Blue Chip Fund is offering at present 23.4 % annual returns.
In the SIP calculator, the investor would need to fill the monthly investment amount, the annual rate of return, the investment period and specify whether to adjust for factors like inflation. After filling in the required details in the respective boxes, the investor would just need to click on the ‘calculate’ button where the estimated accrued amount after the specified period will be displayed on the screen.
Alternatively, SIP calculator may also ask the investor to specify the Mutual Fund and scheme, investment amount, investment frequency and SIP tenure instead of specifying the rate of return.
SIP Calculator Specimen
Let us consider an example for calculating the approximate money accrued to an investor on his SIPs.
Let us take the minimum amount of Rs 1000 per month and a rate of return of say 15 % and investment tenure one year. Fill in these amounts in the respective boxes and what do you expect to get at the end of one year? Very simple compounding problem, your investments accrue to an amount of Rs 13021, which is a return of Rs. 1021 (Rs 13021-Rs 12000). For longer periods and disciplined investments, the compounding can yield appreciable returns.
Benefits of SIP Calculator
The SIP calculator is so instant; its benefits include the following:
No Need For Complex Calculations:
The SIP calculator has inbuilt compounding abilities and resources to return the desired calculations. Investors can get estimates for varied funds and schemes, rates of returns, investment frequencies and investment tenure within a few clicks.
Aids In Choosing Fund:
Prior to zeroing in upon any fund the investor would most certainly like to see how much his/her invested money will accrue to after a certain period of time. With SIP calculator on the portal, the investor can easily estimate returns and plan SIP investments before proceeding to subscribing the fund.
The SIP calculator can also be used for obtaining returns yielded by funds over the past few years, say the past five years. Historical information is one of the bases for choosing a fund and funds which have been able to yield stable and significantly high returns in the past rank high on the preference list of investors.
SIP Calculator FAQ
Q. What if the annual rates of return fluctuate?
A.Well, in fact, the annual rates of returns of most funds do fluctuate in the short time period but tend to stabilize over time. The comparison can be made on the basis of past performance of the funds over a sufficient time period say at least three years by using the SIP calculator. Many funds have been able to yield good returns on investments when held for a sufficient period. When rates of returns tend to fluctuate, fresh calculations can easily be made using the SIP calculator. Though switching funds is easy with SIP yet, it is not advisable to switch funds in the very short time period as the investor may tend to lose out on stabilized return rates
Q.How to choose the Mutual Fund while calculating SIP?
Most people tend to choose the Mutual Fund offering the highest rate of return. While there is no harm in doing so yet the point is which mutual fund would they actually want to invest in?
It is advisable to choose MFs of listed companies. Information of top companies offering Mutual Fund investments through SIPs can be easily found from customer-oriented portal. Portal users can get the latest information on top funds, fund performances (historical as well as recent), annual rates of returns and other pertinent information on funds. Investors also need to check up the eligibility like minimum investment criteria, the frequency of investments and lock-in periods if any. Generally SIPs do not have lock in periods and investor may switch or close fund with ease and without incurring losses.
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