How Does an Online SIP Calculator Help Calculate the Returns on Mutual Funds?
Nishant Rathore
SIP is a disciplined investment approach offered by mutual funds. You have to deposit small amounts of money at regular intervals for compounded returns. This can be weekly, monthly or quarterly. The Systematic Investment Plan or the SIP is one of the best ways to invest for several reasons. You do not have to stress about the market timing since averaging works and the portfolio remains well-balanced at the end of the day. Stop the plan at any point. Go to your Demat account and opt-out without attracting any penalty which is an advantage over FD. All of these benefits make SIP popular among millennials too.
An is a quick, simple and accurate online tool. It allows individuals to get an idea of the returns to expect after parking the funds in mutual funds. You can see how much the fund can grow if you invest today. Below is a detailed guide on exactly how it helps calculate the returns on mutual funds.
How Does an SIP Calculator Work?
Manual computation of the returns can be labour intensive and error-prone. This is when an automatic instant calculator comes in handy. Investors simply need to factor in tenure, expected return rate and SIP amount in the mutual fund calculator. Now you can calculate the returns on your investment based on an estimated rate of return and the future value of your investment after a specific number of years. The tool will solely depend on the inputs given by the user. There are two different approaches:
· Investment Amount Approach: This is used when the investor will input the return expected, investment amount, tenure and step-up amount.
· Target Amount Approach: The target amount the investor wants to achieve in the said duration to get an estimate of the present investment required.
An online SIP calculator does not offer any clarification for the expense ratio (if any) and the exit load. The holding period for each monthly contribution will be different at any given point and the returns for each payment will be different as well. Investors can factor in inflation when using the calculator.
The Benefits of an SIP Calculator
Investors are able to analyse 3 figures with an SIP Calculator: principal, the returns earned on the principal and the future value of your investment. You get a clear idea of how much to put aside and how much you are short of your goal. A returns calculator will work with the following formula:
FV= P x {(1+r) n – 1]/ r} x (1+r)
Where: FV: Future value of investment
P: Principal contribution each month
r: Expected rate of return per month
n: Number of contributions towards the principal
A well-built SIP investment calculator offers correct and immediate results and is quite easy to understand. It helps pick the best investment options to suit individual financial needs and make an informed choice. You simply have to click a button to receive inflation-adjusted results for your investment goals which are not usually possible otherwise. The whole process comes with minimum hassle and is completely free of charge for added benefit.