SIP Calculator - Calculate SIP Investment Returns
It is not enough to simply save money to invest. To invest successfully, you need to come up with an actionable plan to achieve long-term financial goals. SIPs are the easiest and most reliable method to start investing, and are the most preferred method for investing in India.
With SIPs, the possibilities are great, but estimating the potential wealth SIPs will grow is most difficult. SIP wealth estimating calculators are great tools to estimate potential wealth and understand its liquidity. Systematic Investment Plan SIP calculators project the potential growth of SIPs with your SIP investment, anticipated rate of return, and investment time horizon.
Finowings blog explains what a SIP is, and concentrating on the SIP return calculator, answers why to use a systematic investment calculator and what makes Finowings SIP Investment Plan calculator smart. In this blog, we concentrate and explain most of our effort to the Finowings SIP Plan Calculator, and we wish to enhance your financial planning and make it easier.
What does SIP mean?
SIPs (Systematic Investment Plans) allow investors to invest a lump sum amount over a given duration by streamlining instalments into a mutual fund which is a preordained strategy as opposed to a lump sum that is invested over the long term. SIP is a more balanced and less risky option and hence is preferred by salaried employees looking to make long-term investments.
For example, suppose you are investing five thousand rupees a month for ten years in an equity mutual fund. Given the advantages of compounding and the rupee-cost averaging investment technique, this is a perfect situation for accumulating wealth.
What are SIP calculators?
SIP wealth calculators help you see the wealth SIP options available to you through a visual representation rather than estimating or guessing SIP wealth, which is a crucial step in the investment process.
Why should someone use a SIP investment calculator?
The primary reason should be the ease of use, as there are no complicated sign-up or sign-in processes that should be a reason for you to skip using a SIP calculator.
1. Instant wealth projection
SIP plan calculators will give a quick estimate of the total amount of wealth you will end up with after a particular time duration and do so instantly, which can help you get a decent idea of total wealth after a certain time fairly easily. You need to include:
- Total investment by you every month.
- Possible interest you expect to receive from the investment.
- The total period you plan on investing for.
2. Transparent Decisions
To remove guesswork, SIP calculators are outstanding. You no longer need to attempt to calculate the compounding manually; SIP calculators will give you the right figure to base your investments on.
3. Helps With Goal Setting
You can set goals that can extend over the longer term using a Systematic Investment Plan (SIP) calculator. With a SIP, you can set goals such as:
4. Compare Various Scenarios
With the SIP Investment Plan calculator, you can make comparisons for:
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Different SIP amounts, whether high or low.
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Different durations of investments.
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Different expected returns.
This allows you to see how simply changing one factor can result in a significant difference in overall wealth.
5. Provides Motivation to Stick to a Plan
You will likely be more disciplined in your SIP if you are able to see the benefits of compounding displayed visually.
Explaining the SIP Calculation Formula
Finowings SIP return calculator does all the calculations for you, but understanding the formula can provide some clarity concerning how it all works.
The future value of SIPs is estimated through the SIP future value formula, which is derived from the compound interest formula:
FV = P × [(1 + r/n)^(nt) – 1] × (1 + r/n)
Where,
FV = Future value
P = SIP amount
r = Expected return (in decimal – 12% = .12)
n = Number of compounding periods that year. (1 for annually, 2 for semi-annually, 4 for quarterly, 12 for monthly)
t = Number of years
Example:
Investing ₹10,000 for 15 years at a 12% return, including compounding interest, would allow you to achieve a significantly greater future value than what you originally invested.
What Influences SIP Returns
Final value estimation is influenced by multiple factors and can be calculated with the SIP investment plan calculator.
1. SIP Amount (P)
The SIP Amount is the monthly investment amount (10,000) from which the future value is calculated, with the amount being assumed to increase annually by a 12% return with a 10% compounding (annually). Hence, the greater SIP Amount you invest, the greater the final cumulative wealth will be.
2. Rate of Return (r)
This will differ depending on the type of mutual funds:
- Equity Funds: 10% to 14%
- Hybrid Funds: 8% to 11%
- Debt Funds: 6% to 8%
3. Tenure (t)
The longer the period of SIP investment, the bigger the amount will grow by compounding interest. Even a slight increase in the time period can significantly alter the total wealth accumulation.
Where are SIP Calculators Useful?
These planners’ SIP calculator works for equity mutual funds, focusing on this means high growth potential; long-term SIPs are appropriate, debt mutual funds, hybrid funds, Index funds and ETFs. Given SIPs are common across mutual funds, this means the calculator’s versatility is limitless.
Steps for using Finowings SIP calculator
Using Finowings SIP calculators is simple. Just take the following steps
Step 1 - SIP amount
For instance, let’s take the starting SIP amount of 5000 Rs
Step 2 - The expected annual return
This is usually a 12% return.
Step 3 - The investment duration
This is either 10 or 20 years.
Step 4 - Click calculate returns
This gives you instant feedback on the following
i) Total amount invested.
ii) Estimated interest earned.
iii) Final value of your investment.
Certain calculator variations even provide additional visual aids, such as graphs and charts, to display the investment’s growth.
Benefits of using Finowings SIP Investment Plan
1. Fast and accurate projections
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Since no manual work is required, instant results appear.
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There’s no need to worry about mistakes or doing things the long way.
2. Smart Money Planning
Knowing how to plan your finances so you realistically achieve your SIP goals is an important part of planning your finances.
3. Explore Various Mutual Funds
You can compare equity, debt, hybrid, and index funds for expected returns.
4. Wealth Perception in the Future
This will help to inform you of the accurate planning and preparation needed to achieve your goals in the future.
5. Improved Judgements
Altering the settings can help you determine the most appropriate SIP amount and time frame.
6. Anywhere, Anytime
You can use the Systematic Investment Plan Calculator on Finowings, and there is no extension or add-on software needed.
Results Interpretation and Smart Doings
With the SIP Calculator, you can:
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Predict the returns you can get from your SIP.
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Identify the gaps between your financial goals and your current assets.
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Increase your SIP amount if there is insufficient money to achieve your goals.
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Extend your investment time frame to benefit from the power of compounding money.
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Set expectations for returns that can realistically be expected.
Example:
Your present SIP indicates that you will have 32 lac rupees in 15 years, but you desire to have 50 lac rupees. To ensure that the objectives are in line with the 32 lac rupees, you are forced to either raise the SIP amount or lower your expectations.
Common Mistakes to Avoid While Using a SIP Calculator
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Assuming unrealistically high returns.
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Ignoring inflation.
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Not having a financial goal before investing.
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Staying with SIPs during market volatility.
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Not grasping the power of long-term compounding.
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Real-time estimates help in avoiding these mistakes.
Conclusion
A SIP calculator offers the capability to manage your finances in the best possible way. One can predict the accumulated wealth at the end, and evaluate the returns to determine if the investment was beneficial and worth the effort. If you wish to see how your money can grow at a certain rate and you want to leverage compounding, the Finowings SIP investment plan calculator can make your financial planning a whole lot easier.
