A Systematic Investment Plan widely known as SIP is a pathway to invest in mutual funds. It demands making a disciplined investment in a predestined mutual fund scheme routinely.
SIP is an instrument for investment that is best-suited for the long-term investors to gather wealth and meet their financial goals. This implies that you can have the maximum returns via Systematic Investment Plan only, provided you start investing early.
In this context, an SIP return calculator can help investors get an understanding of expected returns on maturity based on their investment, estimated rate of return after a certain number of years.
SIP return calculator is an online tool that allows individuals to have an idea of the future values and returns on the mutual fund investments.
These calculators are devised to give the investors an estimate of their return on mutual fund investment.
However, the actual returns offered by the schemes of mutual funds varies on various factors. The SIP calculator does not provide clarification for the exit load and expense ratio, if there are any.
SIP return calculator is an online tool that analyses the value of the future investment on a certain mutual fund. This is based on the principal amount and expected returns over a certain period of time. SIPs are usually invested on a weekly, quarterly, or monthly intervals.
Here is an example of the SIP return calculation using the formula of SIP return from Forbes:
P × [{(1 + r) n – 1} / r] × (1 + r)
P = Invested amount = INR 10,000
r = Expected rate of returns (12%) = 0.01 per month
n = Number of EMIs (10 years x 12) = 120 EMIs
10,000 × [{(1 + 0.01)120 – 1} / 0.01] × (1 + 0.01)
= Rs 23,23,390.76
Therefore, the maturity corpus amount of X would be around INR 23.23 lakh on the monthly regular SIP investment of INR 10,000 for 10 years with 12% expected rate of interest, out of which INR 11.23 lakh would be his earning as interest.
The result may vary slightly.
SIP return calculators offer a great way for retail investors to understand the value of investing and how much will be the return, furthermore helping them to save money for the long term.
While the returns are generated over a long period of time, against a huge sum investment, it may be better to know how to calculate and make a better move. However, they still remain a great tool to save money and reduce the risk of investing.
