A calculator is one of the greatest inventions of mankind. One does not need to do manual calculations anymore as one can use the calculator for the same. The purpose of any calculator is to make life simpler for the user. The same is the case with the online SIP calculator.
An online SIP calculator is a free and easy-to-use tool that can compute results in a jiffy. This type of calculator is used by all mutual fund investors who wish to know the total potential returns which their investments can fetch over a certain duration.
For those who do not know, a Systematic Investment Plan or SIP is a simple and effective way to save and invest a fixed sum regularly in any mutual fund scheme. All an individual has to do is decide the monthly SIP sum (which cannot be lower than the minimum investment sum mentioned in the mutual fund Scheme Information Document (SID)), and then decide the date of the month on which this sum will be deducted. Once the individual chooses automated SIP transactions, every month the predetermined SIP sum will be deducted from the investor’s savings account and electronically transferred to the mutual fund portfolio. Depending on the current NAV, the individual can buy units.
There are 3 major types of SIP calculators which any mutual fund investor can use either to determine the potential future returns of their existing investments or to determine the total corpus which they would accumulate if they invested a particular sum in the mutual fund scheme via SIP for a predefined period.
Let us understand these 4 types of SIP calculators briefly –
Basic SIP calculator
This is the most basic type of SIP calculator where all an individual has to do is:
- Enter the monthly SIP sum (in rupees)
- Enter the tenure (in years or months)
- Enter the expected rate of return (in percentage)
This SIP calculator will compute and show results as follow –
- Total invested sum
- Total corpus accumulated (sum invested + interest earned)
Top up SIP calculator
Suppose you wish to achieve your life’s financial goals faster; you can use the SIP top up calculator. Here, the individual must:
- Enter the monthly SIP sum (in rupees)
- Enter the tenure (in years or months)
- Enter the top up sum (some calculators have this is feature rupees, some in percentage form)
- Enter the expected rate of return (in percentage)
The top up SIP calculator will compute and display:
- Total sum invested
- Total returns earned without top up
- Total returns earned with top up
If you top your SIP amount every 12 months, the chances of you achieving your goals faster is high.
SIP calculator for a specific goal
This type of calculator helps investors determine the SIP sum that they need to start investing regularly to achieve the desired corpus. Suppose you wish to build a corpus of Rs 1 crore for your post retirement life. You have 150 months in hand and expect the mutual fund scheme to deliver 10% annual returns.
In the calculator, enter:
- Total corpus needed (Rs. 1 crore)
- Investment horizon (150 months)
- Expected rate of return (10%)
The SIP calculator will derive to the following conclusion:
- Total SIP needed – 33,707
Here, the total invested sum would be Rs. 50.56 lacs and the remaining of the corpus would be accumulated from the interest earned throughout the investment horizon.
Investors must understand that the SIP calculator does not take certain things like expense ratio and exit load into consideration. These are just assumed returns.
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