With the ease of monthly fixed payments and the expert guidance of professional fund managers, it's no wonder that Systematic Investment Plans (SIPs) have taken the investment world by storm. SIP provides a disciplined approach to investing. Investors frequently use the SIP calculator to estimate the possible profits from SIP investments.
In this article, we'll explore an easy and efficient way to calculate SIP returns.
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A SIP calculator is an online software that helps you estimate the future worth of your investments via systematic investment plans. It enables you to calculate the prospective returns on your SIP investments by considering numerous criteria, such as the contribution amount, investment period, estimated rate of return, and investment frequency.
You must consider a few simple steps to determine returns. These include:
The first step in calculating SIP returns is to decide on the investment amount. This refers to the sum you wish to invest periodically in a mutual fund scheme. The investment amount can be chosen based on financial goals, risk tolerance, and capacity.
The investment period refers to the duration you plan to invest in a specific mutual fund scheme through SIPs. It is crucial to determine this period as it directly impacts the returns. The lengthier the investment tenure, the greater the potential for compounding growth and higher returns.
The expected rate of return is the annual growth rate that you anticipate from the specific mutual fund scheme. While historical returns can serve as a reference, it is essential to mention that past performance does not guarantee future results. You must carefully research and conduct a thorough analysis to reach a realistic expectation.
SIPs allow you to contribute a fixed sum at regular intervals, typically monthly or quarterly. The frequency of investment plays a significant role in determining the overall returns. More frequent investments enable the benefit of rupee-cost averaging, reducing the impact of market volatility and potentially enhancing returns.
Once the details above are determined, it is time to leverage the SIP calculator. Several financial institutions and mutual fund websites offer user-friendly calculators. Input the investment amount, investment period, expected rate of return, and frequency of investment into the calculator. The tool will then provide an estimated investment value at the end of the SIP maturity.
Now that you understand how SIP is calculated, let's discuss the advantages of using a SIP calculation tool.
Using a SIP calculator has its limitations and drawbacks too:
This calculator lets you understand the possible investment returns and make educated decisions. Remember that while a SIP calculator gives estimates, actual returns may differ. Before making investing selections, talking with a financial professional or undertaking extensive research is best.