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What is the Rate of Return Using a SIP Calculator
07 Aug 2023

An online simulation that works to gauge returns of a SIP (systematic investment plan) investment is an effective way to organise investments. Whether you invest in a SIP, or any other investment instrument, a SIP calculator can help you to plan your principal investment in a SIP.

The Rate of Return Using a SIP Calculator

There exist as many kinds of investors as there exist investment channels. If you open a demat account today, you are probably one of those investors who don’t mind the risk of share investment. Then again, you may be an investor who wishes to balance risks and rewards. This is where a SIP can help you. Mutual fund investment in equity or debt (or a combination) is made via a SIP. For millennials, this is a gradual way to invest with instalments of investments made from time to time. You can get a heads up for the rate of returns from any mutual fund invested through a SIP with a SIP returns calculator.

Although the real rate of returns you get through your SIP depends on how markets perform at a certain time, the estimates you get through SIP calculators are based on past performance of instruments. Still, rough estimates are better than none at all, and planning your finances is undertaken with some benchmark in mind.

The Working of the Calculator

In case you are an investor, and have invested in any upcoming IPO or any other investment stream, you know, by now, that investment tends to be a bit of a gamble in the case of instruments that are not of a fixed income. For instance, if you invest in a fixed deposit, you know your returns exactly as these are based on a set rate of interest in advance. If you want to know how much interest you will receive on your FD based on the principal, interest rate, and duration, you can use an FD calculator. However, with a SIP, the rate of returns depends on the performance of securities in any particular mutual fund invested through a SIP.

A SIP returns calculator operates by values entered in fields by users. The amount of your investment, the duration, the frequency of instalments, and the expected return rate is entered. Then, all users do is press a “submit” button and the online calculator does its job. The returns are calculated based on a formula of compound interest, as you invest in a SIP in monthly instalments (generally). You can use a compound interest calculator to see how much your investment could increase over time with consistent monthly installments. As you add more amounts with each instalment, returns should ideally increase based on the rate of returns.

Let a SIP Calculator Do Its Job

When you first open a demat account to invest in the share market, you have no way of knowing the exact returns you will get, as this is based on the stock’s performance. In the same way, you base your subscription to an upcoming IPO solely on estimations of a promising outlook for a new company. A SIP calculator is also based on the estimated returns of any mutual fund in a certain tenure. The key to solid investment is to plan well and calculators help you do this in the best possible way. In addition to a SIP calculator, you can also use an inflation calculator to see how much your money will lose its value over time. This can help you make informed financial decisions.

Related Blogs: 5 reasons for the sharp growth in SIPs in India | Tax implications on a Mutual Fund and SIPs | SIP and the power of compounding | If you're investing in SIP, make Mutual Funds SIP calculator your best friend