Planning is one of the most important parts of successful SIP investment. There are four mathematical elements to any SIP investment – the desired corpus amount, the average returns that the fund gives, the monthly instalment amount, and the tenure. The value of each of these elements changes when one is changed. But how do you manage such complex calculations in your mind? Well, you don’t have to, thanks to the systematic investment plan calculator. Let us learn more about systematic investment plan calculators and learn why it is important for you to use one before you begin investing.
What is SIP?
A SIP is a tool that helps you invest in mutual funds. Normally, investors try to invest a lump sum amount of money in a mutual fund. This is done to appreciate or protect the capital. But the biggest prerequisite here is a large corpus. The same has to be significant enough for you to earn decent returns from this method of investing. Moreover, the goal of the investment is to protect or appreciate the capital you already have. But what if you want to create such a corpus for the future?
Be it a retirement fund or a fund for that dream vacation of yours; a SIP is something you can use. SIP investments allow you to invest smaller amounts of money each month to slowly yet steadily build a significant corpus over time. This is equally helpful for beginners as well as you don’t have to time your investments as well. But one factor that is important in the success of a SIP is planning. This mostly revolves around the numbers related to the scheme. SIP calculator is a tool that you can use here.
What is a SIP calculator?
As said above, there are four key elements to any SIP investment.
- The desired corpus amount that you want to create at the end of the tenure.
- The tenure of the investment.
- The amount of money that you have to invest every month.
- The average returns the fund you have chosen gives.
Here, you should reach an equilibrium between the four to reach the desired corpus in a manner that works for you.
For instance, if the desired corpus you have in mind is Rs.5 lakhs, you have shortlisted a fund that gives returns of 10%, and you give yourself a tenure of 5 years to make money, you can use the SIP calculator to find the ideal monthly instalment amount.
Here, when you use a SIP calculator, you can find out that investing an amount of Rs.6500 in a fund that gives 10% returns for five years will give you a corpus that is slightly more than Rs. 5 lakh.
Similarly, in a situation where you have a monthly instalment amount that you can afford, a fund that you have chosen, and the desired corpus amount, you can use the SIP calculator to find the time it may take for you to reach the desired corpus.
Are SIP calculators 100% accurate?
SIP calculators deal with four elements, of which one is a variable – the average returns that the fund gives. Although funds tend to correct and stick to the averages in the long term, there can be overly positive or negative stock market scenarios where your calculations can go wrong. Hence, always take the information from the calculator with a pinch of salt and be flexible with your options.
The below pointers show how important it is to use SIP calculators to get your investment right. Ensure you put it to best use by following the pointers in the article.
