In today's unpredictable investment market, ensuring economic stability requires careful education. One such option is the Systematic Investment Plan, which provides strength and growth. A SIP Calculator aids investors in determining the future value of their mutual fund investment through the SIP route. The Calculator has been designed as an essential tool for helping people make informed financial choices. To calculate the corpus amount at maturity, the SIP Calculator requires a monthly SIP amount, investment duration, and expected rate of return.
What is SIP?
A systematic investment plan (SIP) is a mutual fund investment tool that allows investors to invest at regular intervals. Investors can select their preferred investment frequency - weekly, monthly, quarterly, half-yearly, or yearly. SIP offers a disciplined way of investment and benefits investors in the long run with the power of compounding growth. It gives the benefit of Rupee Cost Averaging by providing the chance to buy more NAV (Net Asset Value) with the same investment amount in a bear market. Additionally, investors can choose to stop SIP whenever at anytime.
How does the SIP Calculator Work?
A SIP Calculator follows the below formula:
FV = P [ (1+i)^n-1 ] * (1+i)/i
- FV = Future value or the amount you get at maturity.
- P = Amount you invest through SIP
- i = Compounded rate of return
- n = Investment duration in months
Example of a SIP Calculator
Jane is 30 years old and works as an investor. She is thinking about how she can invest money for retirement purposes. So, Jane decides to put money into a mutual fund product via a Systematic Investment Plan.
- Investment amount: ₹35,000 per month
- Investment period: 30 years
- Expected interest rate: 8% per annum
- Frequency of investments: Monthly
Result:
With the above Formula the SIP Calculator would give following results:
- Future Value of the investment: ₹5,25, 10,331
- Total Investment: ₹1,26,00,000 (35,000 * 12 * 30)
- Potential Returns: ₹3,99,10,331 (Future Value - Total Investment)
How to use ClearTax SIP Calculator
You can easily use ClearTax SIP Caculator by following below steps:
- Enter the Monthly SIP amount
- Now Fill out other details, Investment duration and expected rate of return
- Calculator will show you the estimated corpus with a beak-up of earned interest and invested amount.
Advantages of Using a SIP Calculator
A SIP calculator has its advantages that it offers to the investors:
- Accurate Planning: SIP calculators forecast the future growth of an investment well based on specific input criteria. It includes the amount to be funded, the duration, and the expected return. SIP calculators apply mathematical algorithms. It develops definite approximations so traders can manage their finances.
- Comparison of Several Scenarios: Changing the components of your inputs in SIP calculators, like amount, duration, and anticipated rate, means that they help users evaluate various investment conditions. They assist them in making informed choices. It is based on their economic objectives. Thus coming up with alternative investment strategies that may result in desirable outcomes.
- Visualisation of Potential Returns: Through systematic investing, SIP calculators help buyers see how their money can grow. Regarding their investing plans, graphs and charts are also available to help them understand the power of compounding. It enables them to make informed choices.
- Goal Setting and Progress Monitoring: SIP calculators aid traders in setting attainable financial targets and monitoring their progression towards them. By entering their specific financial goals, such as retirement savings or funding their child's education, investors can estimate the required investment amount. From there they can see how they progress over time.