logo

SIP Calculator – Know Your Returns from Systematic Investment Plans

banner-img
author
verified
Manish Kothari
20 Likes | 181 days ago

Like

Share

isVerifiedExpertAuthor is a Zfunds Verified Expert
author
Manish Kothari
Gurugram
whatsapp

Mutual funds are amongst the most popular tools to invest money in a wide range of securities, such as stocks, bonds, gold, etc, and there are two ways you can invest your money in such schemes. While the first one is a lump sum, which is a one-time investment in a mutual fund scheme. The other one is SIP, also known as a systematic investment plan, wherein you invest a fixed amount in a mutual fund scheme at regular intervals. You can choose to invest on a weekly, monthly, or quarterly basis. A MF SIP calculator is a tool that enables investors to determine the returns they can expect from their SIP investments. Here you will find all the information you need about a SIP calculator online. You can also analyze your future returns from SIP investments for different periods of time at different rates of return.

What is a SIP Return Calculator ?

As an investor, you might want to know the returns you can expect from mutual funds. While gauging returns from one-time or lump sum investments can be straightforward, it can be quite challenging to analyze returns from SIP investments. This is where a SIP calculator comes into play! This is a tool that can help determine the returns from regular SIP investments over several years. SIP mutual fund calculator can provide you with the returns you can expect based on an estimated rate of return from your investments after a certain number of years.

Benefits of a SIP Calculator for Mutual Funds

Many mutual fund experts claim that SIPs are a more lucrative mode of investment as compared to lump sum as they make you financially disciplined and assist you in developing a habit of saving and investing on a regular basis. This habit, if sustained, can be a life-changer for anyone. Here is how an online SIP mutual fund calculator can benefit you:

Helps you analyze the amount you want to invest to reach expected returns after a certain period of time.

Tells you the overall amount you will invest in mutual fund schemes through regular investments for a certain period of time.

Provides an idea about the value of your investment in the future.

Supports informed mutual fund investment decisions by helping you determine how much money you need to invest and for how long to achieve your financial goals.  

Shares results immediately as you do not need to perform complicated computations manually. You can also adjust various variables, such as number of years, investment amount and expected rate of return, instantly with the click of a button.

Thus, using a SIP calculator, you can adjust the investment amount and estimate the wealth you can generate with an expected rate of return after a certain number of years.

How Does a SIP Calculator Work ?

Online SIP calculators have made it immensely easy to compute returns from regular mutual fund investments. While you do not need to know the precise formula or method applied to determine returns, understanding it can certainly help boost your confidence about your investment strategy and the results derived using a SIP returns calculator.

SIP calculators determine your future returns using the below-mentioned formula.

TR = P x {[(1 + r)n – 1] ÷ r} x (1 + r)

Here is what the various components of the formula mean:

TR is the total amount you receive at the time of maturity or redemption of mutual fund units.

P is the principle or amount of funds you invest each month through your systematic investment plan.

n is the number of payments you make throughout your SIP investment journey.

r is the per month rate of return you expect from your investments.  

Now let us understand the above formula using an example.

Suppose you wish to calculate the total returns you will get by investing INR 10,000 per month for a period of two months while scoring an annual rate of return of 12 percent on your investment. In that case, here is how your total returns after two years will be calculated:

TR = 10000 x {[(1 + 0.01)24 – 1] ÷ 0.01} x (1 + 0.01)

Since the annual returns are 12 percent, the monthly return on investment would come out to be 1 percent. Hence, we have mentioned 0.01 in place of “r” in the formula.

Frequently Asked Questions about SIP, Mutual Funds and SIP Calculators

Q. How accurate are online SIP calculators?

Ans. Online SIP returns calculators only provide you with the expected returns from mutual fund SIP investments. Since, your mutual fund investment amount and rate of return may vary, it is difficult to predict your precise returns from SIPs. Moreover, SIP calculators do not take into account the enter and exit loads that may be applicable in the mutual fund scheme of your choosing.

Q. What is the maximum period for investing in a mutual fund through SIP?

Ans. There is no maximum time limit for investing in a mutual fund scheme through a systematic investment plan. You can invest through a SIP for as long as you want to.

Q. Do all mutual funds give the same returns?

Ans. No. The returns from different mutual fund schemes can vary drastically depending on the economic and market conditions.

Q. How much return should I expect from my mutual fund investments?

Ans. An annual return of between 12 percent and 15 percent is considered a good return. However, it is difficult to achieve this rate of return on a regular basis. Therefore, you must try to achieve between 12 and 15 percent per year over a period of several years. ZFund mutual fund advisors can help you pick the best mutual fund schemes for minimum risk and maximum returns.

Q. How much can I invest in mutual funds through a systematic investment plan?

Ans. There is no upper limit for investing in mutual funds through SIP. However, there is a lower limit and it depends on the mutual fund. While some schemes have a minimum monthly investment of INR 1,000, there are some other schemes where you can start with as low as INR 100 per month.

Q. Can I start SIPs in multiple mutual fund schemes?

Ans. Yes, you can start SIPs in as many mutual fund schemes as you like.

Q. What factors should be taken into account while investing in a mutual fund scheme?

Ans. You can consider expense ratio, holdings, type of fund (equity, debt or hybrid), fund manager, past returns, lock-in period, entry and exit ratios, etc before investing in a mutual fund scheme.