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How Do You Calculate Your Returns?
24 Jul 2023

If you are one of those people who are still in doubt about investments, your doubts should be cleared away. Why should you invest? Well, the simple reason is that investment helps wealth to grow into more wealth, and who doesn’t want that? With expenses mounting, investment is the single most ideal answer to building wealth to meet financial requirements. A SIP (systematic investment plan) is one of the good ways to invest your money. All investment is conducted online these days and before you think of a SIP, you should use a SIP calculator, or a step up SIP calculator, to estimate your returns. Nonetheless, first you must know what a SIP entails to ensure effective use of calculators. 

Know About a SIP

A systematic investment plan, or a SIP, is an option for investment that is offered by mutual fund firms. In other words, a SIP is one of the vehicles you can use to invest in mutual funds. If individuals were to invest in regular mutual funds, they would have to pay a single lump sum to invest initially. With a SIP, individuals can make small investments in periodic instalments, either weekly, monthly, or quarterly. You do not have to open a demat account for a SIP investment. However, if you think a SIP will benefit you, then you can use an online SIP calculator to calculate returns. With a SIP, you also have options to add to your instalments at a later date, in case you have funds available. This is when you step up your SIP. Again, you can use an online tool, the step up SIP calculator to compute returns on a SIP investment 

Apart from the benefits of online calculator use in selecting a good SIP for your needs, a SIP offers a disciplined approach while making investments. This is a positive outlook where investment is concerned, especially to create wealth for the long term. 

A SIP makes you disciplined in financial matters as well as inculcates a saving habit. The earlier you start a SIP, the more you can grow your wealth. Apart from this, your wealth gets compounded over a term and you stand to make significant gains. 

Why should you use a SIP calculator?

Not all individuals have lump sums or large sums of money to invest at one go. For small investors, or those just trying out investments for the first time, SIPs are appropriate choices. Moreover, you can go in for a step up SIP in the event you have more amounts to invest at a later date. You can use a SIP calculator with step up facilities to compute your additional returns if you increase your investment. 

Anyway, an online tool like the SIP calculator tells you what your returns in a SIP may be if you invest a certain amount for a particular tenure. By entering a few details, you can get near accurate results and this helps you make informed choices as to which SIPs can benefit you. 

How does the calculator work?

The SIP calculator and the step up SIP calculator are online digital tools that calculate returns on your investment in any SIP. SIP returns are computed based on principles of compound interest. All you really need to do is to enter the amount of investment made on a monthly basis, select the term of investment (in years), and fill in the rate of interest based on past information. The calculator will do the rest and give you a result of the expected returns on your SIP investment. Furthermore, the calculator also displays a comparison of your own SIP returns vis a vis other options of investment like fixed deposits, for instance. A step up SIP calculator will show you returns on additional amounts including your initial SIP investment and any interest accrued thereof. 

How to Calculate Your Returns 

With certain modes of investment, online calculators can provide invaluable solutions when you wish to select the most appropriate investments for your unique goals. Certain other investments like investing in stocks and any upcoming IPO do not need any calculator use. Coming back to the topic in question, the SIP calculator, you may be wondering exactly how to get results that show you your estimated returns. 

SIP online calculators may vary from one online platform to another, but by and large, most of these have commonalities and use is basic. Through an easy and user-friendly menu, calculators will show you fields that you must enter information into. The information that you need to enter into a SIP online calculator typically includes the amount of money you plan to invest each month, the expected rate of return, and the number of years you plan to invest. The calculator will then use this information to estimate the potential returns of your SIP investment. You can also use a CAGR calculator to estimate the potential returns of your SIP investment. CAGR is a measure of the average annual growth rate of an investment over a period of time. By entering the information about your SIP investment into a CAGR calculator, you can estimate the amount of money you can expect to earn over time. First, any SIP calculator may ask you for the following data to be entered in different fields: 

The amount of each monthly investment 

The period of investment

The expected returns annually (based on projected interest rates from past performance)

You can also calculate returns with inflation if you choose to know how much more to invest if you want to beat inflation. Explore the inflation Calculator and gain deeper insights

Using the Calculator - Steps

Whether you wish to calculate SIP returns or use the SIP calculator with step up capabilities, the following steps have to be taken: 

  1. Enter the amount you wish to invest. In SIPs with mutual funds, amounts are in the minimum of Rs.500, in general.
  2. Enter the rate of interest (based on past interest rates of the same fund)
  3. Enter the term of investment. This is the period during which you wish to stay invested with your SIP. Usually, the minimum term is six months. 
  4. Click on the “Submit” or “Calculate” button, or any other tab that indicates where the calculation has to proceed.
  5. After this, the online calculator will automatically generate the answer in terms of returns you will earn from your chosen SIP. 

Use Tech to Invest

The use of technology in all fields today is a given. We rely on online platforms for most of our financial activities like fund transfers, trading, and getting insurance to investing in any upcoming IPO. Whether you use an online portal or an app, you can open a demat account or invest in a SIP, or do both. The use of online calculators in many areas of investment is becoming a popular way to make sound investment choices. Online calculators, such as the CAGR calculator, can be a helpful tool for investors who are looking to make sound investment choices. These calculators can help investors to estimate the potential returns of their investments, as well as the impact of costs and risk on their returns.


Related Articles: Investing in Mutual Funds is Now Easy with MO Investor App | Invest In Mutual Funds Online In 5 Simple Steps |  How to Analyse Mutual Funds for Big Returns | Tax Benefits of Investing in Mutual Funds | Mutual Fund - Need of Financial Plan | Upcoming IPO 


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