SIP Calculator: Plan and calculate the future value of your SIP investments
About SIP
A Systematic Investment Plan (SIP) is an investment vehicle which allows the investor to invest a fixed sum of money in a mutual fund scheme at regular intervals. The frequency of SIP investment can be weekly, monthly, quarterly or yearly. The disciplined investment option is gaining popularity amongst Indian investors as it gives the benefit of Rupee cost averaging, i.e. it averages out the increase/decrease in the Net Asset Value (NAV). Thereby, an investor can actually invest in a systematic manner without worrying about market volatility and timing the market.
SIP calculator
A SIP calculator is basically an investment tool which helps investors to calculate the returns generated on their mutual fund investments made through a SIP route. While it gives an estimate about the expected returns, the actual returns delivered by a mutual fund scheme depends on so many factors. Also, the returns calculated from this SIP calculator are indicative and rely upon the projected annual return rate. This projected rate, inturn, depends on the historical performance of a mutual fund. So, in a way, SIP calculator computes the future value of a SIP investment using the past years’ showing of a mutual fund scheme.
As stated above, the objective of the investor should be to use this SIP calculator in such a way that the expected returns will be as close as to the actual returns. For this, he/she needs to take due diligence for ascertaining the projected rate of return.
Following points should be kept in mind while choosing this projected rate:
- An investor can take the category return for a defined time duration; if he/she has finalized the category of a mutual fund scheme where he wants to invest.
- An investor can opt for the SIP return of the specific scheme if he/she has some specific scheme in his mind & wants to check its performance for a stipulated time period.
- The rate should align the investment objective of a scheme with the financial objective of the investor.
Please keep in mind the SIP returns of a mutual fund scheme are not fixed unlike a fixed or a recurring deposit. These are market linked and therefore fluctuate as per market movements which may impact the estimated returns.
Benefits of the SIP calculator
The SIP calculator is a beneficial & exploratory tool which could benefit an investor in the following ways:
- Time-saving tool: The SIP calculator is quite handy, easy to use & navigate. An investor gets the desired result almost instantly and thus saves his time from knowing & doing those complex calculations on his own.
- Determines the target amount: The research-oriented & time-tested SIP calculator computes the target amount based on the series of SIP investments, frequency & duration of these investments and the percentage of expected returns.
- Goal planning tool: The SIP calculator is a great way to plan for your various life goals too. For e.g. if you plan to buy a car after 3 years then the tool can tell you the monthly SIP which you need to make to accomplish this goal. It may involve a bit of hit & trial method but if you have zeroed in on the car you may want to purchase or have set aside a target budget for it then you can calculate the SIP series based on the expected return out of these investments.
- Helps in Decision making: This simple yet effective tool converts a confused & an unsure investor into an aware & an informed one. It helps him in making the right investment decisions & channelize his savings in a wise manner.
Who can use a SIP calculator?
Any individual who is planning to invest in mutual funds through SIP can use this calculator to determine the future value of his/her investments. Even if you are already investing in mutual funds through SIPs, you can use the calculator to determine the future value of your on-going investments.
Steps involved to use a SIP calculator
To use this SIP calculator, you are required to provide the following details: a) How much money do you want to invest, i.e., monthly investment amount b) Duration of investment, i.e., how long you will be investing c) Frequency of investment, i.e., weekly, monthly, quarterly or yearly d) Percentage of expected returns, i.e., how much returns do you expect from your investments.
Calculation of SIP returns
The SIP calculator uses the power of compounding principle to calculate the future amount of your SIP investments. The longer you stay invested, the longer you gain.
To understand this, let us take an example. A monthly investment of Rs 5,000 for 10 years at an expected rate of return of 12 per cent will earn you Rs 11.61 lakh. The gains made by you in this scenario will be approximately Rs 5.61 lakh (Rs 11.61 lakh minus 5000*10*12).
Similarly, if you stay invested in the scheme for 15 years, the future amount of your investment will be Rs 25.22 lakh, vis-a-vis an invested amount of Rs 9 lakh (i.e. 5000*15*12). By investing for five years more, the gains from your investment have almost doubled.
What does the SIP calculator show?
Based on the information provided by you, the calculator calculates the amount you will get from your SIP investments. If you have linked the investment to your future goals such as retirement, child's education or buying a house, then the future amount can suggest whether you need to make additional savings, if any, to fulfill the goal.
What does the SIP calculator don't show?
SIP calculator doesn’t provide information regarding the taxes which an investor needs to pay on the total capital gain of his investment. For this, he/she needs to check the tax treatment of the broad categories of a mutual fund scheme - equity, debt, hybrid & others. SIP calculator, also, doesn’t show the costs associated with a mutual fund investment. This cost is primarily attributed to the total expense ratio of a scheme and the exit load which one may need to pay for exiting a scheme. Please visit our various Mutual Fund Scheme pages for the complete information around a scheme, including the tax implications, expense ratio, exit load & others. Some popular scheme pages for your reference:
- Axis Bluechip Fund
- HDFC Balanced Advantage Fund
- Mirae Asset Emerging Bluechip Fund
- SBI Small Cap Fund
- Parag Parikh Flexi Cap Fund
- Axis Long Term Equity Fund
Frequently Asked Questions (FAQs):
What is a SIP?
An investment tool that provides a systematic way of investing by keeping aside a predefined amount at periodic time intervals. These small portions of one's money is then collected by mutual fund houses which form a pool of such accumulated funds. The corpus is then invested in the said mutual fund category which this corpus is intended for. The money can be invested on a weekly or monthly or quarterly or yearly basis. Such frequency is normally decided at the time of starting the SIP. The frequency may be modified later also and the fixed sum too can be increased or decreased. The investor needs to check the feasibility of such an option with the mutual fund house itself.
How does SIP work?
Through SIP, one can buy units of a mutual fund scheme for the specified amount. The number of units which can be purchased depends on the NAV of this scheme on a specified date which needs to be given by an investor at the time of setting up this SIP. One also needs to give either a one-time bank mandate or add the biller to his bank account. This way, the process of investing through SIP gets automated & streamlined and one doesn't have to do it manually each time. So, it is seamless & hasslefree.
Are SIPs & mutual funds different things or are these similar?
Systematic Investment Plan (SIP) is just an investment style & a way to invest in a mutual fund scheme in a disciplined manner. SIPs are actually a great way to channelize one's savings & plan for your various life goals accordingly. Besides this, SIP can also act as a smart medium & a deterrent to avoid wasting your income on discretionary expenses.
Which is better: SIP or a lump sum investment?
Both the SIP & lump sum investments are actually the investment styles of investing into a mutual fund scheme. Ideally, both are good ways of investing. It largely depends on the cash in hand/cash at bank one holds & the investment goals. Generally, a salaried individual prefers the SIP route as he can invest a certain sum of money regularly through this. However, if one has a significant sum of money with him, he may go for a lump sum investment too. Please remember, PAN card is mandatory for making a mutual fund investment either through SIP or through lump sum investment.
Which is better: Fixed/Recurring Deposit or SIP?
While fixed/recurring deposits are fixed income instruments which are usually safe & risk free; SIPs essentially are market linked and thus the returns accrued from these essentially depends upon the increase/decrease in NAV due to market fluctuations. However, there is ample data to validate that the SIP returns from an equity mutual fund scheme outperform the returns from a fixed income instrument by a wide margin in the long term. So, one needs to have a prudent & patient approach while investing in mutual funds. Having said that, there are some common multiple parameters for a comparison between Fixed/Recurring Deposit and SIP. These parameters are: investment objectives, liquidity, tax implications, returns & risk.
How much money can I invest through SIP in a mutual fund scheme?
There is no limit to the amount you could invest through SIP. The ideal way is to align your SIP investments with your life goals. For this, you should identify your goals first, set a timeline for it & the corpus which you need to accumulate to accomplish this goal. You should have a clear picture of your current financial situation too. This will help you in the decision making, whether you can invest this amount or may need to increase/decrease it depending on your financial standing & risk appetite. Please note that while there is no maximum limit, the minimum SIP investment differs for every scheme and may be as low as Rs. 100 monthly for some of the schemes.
What is the Minimum & Maximum tenure of a SIP investment?
There is no minimum & maximum time period of a SIP investment. Only the tax saving/ELSS (Equity-linked Saving Schemes) have a lock-in period of 3 years. However, the investors need to check the exit load which they may have to incur if they exit the scheme before a stipulated time period. But, generally as per experts, it is recommended to invest in an equity mutual fund scheme for a period of at least 3 to 5 years. Equity schemes are volatile and thus recommended for long term goals when the volatility gets averaged out & generates decent returns from these SIP investments.
What are all the different types of SIP available?
The different types of SIP available are as follows:
- Regular SIP: This is the conventional method of Systematic Investment where the investor can invest a fixed sum of money in a mutual fund scheme at regular intervals. The frequency of SIP (Systematic Investment Plan) can be weekly, monthly, bi-monthly, quarterly, half-yearly or yearly.
- Step-up or Top-up SIP: A Step-up SIP enables an investor to increase the SIP amount by a particular percentage or amount from a specified time period. For e.g. A Step-up SIP of 10% on a yearly basis would mean that the SIP amount will increase annually by 10% of the amount of the previous year. So, a Rs. 5,000 monthly SIP beginning from this year will increase to Rs. 5,500 monthly SIP automatically from next year.
- Perpetual SIP: A Perpetual SIP essentially means which continues to remain in force until any specific instruction to stop it or which does not have any end date specified by an investor.
- Flexible SIP: A Flexible SIP lets an investor enjoy the flexibility of altering the investment amount as per his preference. One needs to inform the fund house at least a week before the SIP installment date for changing the investment amount.
- Trigger SIP: This is a modern day SIP facility which allows an investor to redeem his investments partly or fully or switch his investments to another scheme automatically upon reaching a pre-defined trigger point. These trigger points are related to a certain event or occurrence. Such triggers can be set for upside/downside NAV, index level, date or capital. The objective is to curtail losses by eliminating market risks.
- Multi SIP: A Multi SIP powers an investor to invest in multiple schemes of the same fund house through a single instrument.
- SIP Insure: Several mutual fund houses have started bundling a group term life cover at no extra cost with the amount of SIP made by the investors. The insurance coverage continues to remain in force as long as the investor stays invested in the scheme. The amount of insurance cover may range from 20 to 120 times of the monthly SIP and generally increases gradually with time.
How does the ET SIP calculator work?
To use ET SIP calculator, a user is required to enter the following details: - How much money do you want to invest, i.e., monthly investment amount
- Duration of investment, i.e., how long you will be investing
- Frequency of investment, i.e., weekly, monthly, quarterly or yearly
- Percentage of expected returns, i.e., how much returns do you expect from your investments
Can I increase the SIP in a mutual fund scheme?
There are 2 ways to increase the SIP in a mutual fund scheme: - An investor could opt for Step-Up SIP facility at the time of starting his SIP investments, This will enable the investor to increase his SIP periodically by a specified amount or percentage.
- The investors could increase their Regular SIPs too. However, not all the fund houses give the feature of increasing regular SIP through online mode. In offline mode, the investors may be allowed to increase or decrease their SIPs anytime. But in online mode, they may be required to register fresh SIPs for a scheme for the increased amount.
