A Guide On a How SIP Calculator Can Help You Plan Your Investments
Today, you can find several investment instruments and financial products on the market. In the current economic atmosphere, conventional instruments like FDs are losing their popularity. Interest rates are low, and investors find that they don’t get adequate returns on investment with these fixed instruments. A great way to save and build wealth is to sign up for a SIP, or a Systematic Investment Plan. However, to know how a SIP calculator can be of use while planning your investments, you should be in the know of how a SIP works, and the benefits you yield through such a plan.
A SIP Explained
If you wish to have a disciplined approach to investing, a SIP or Systematic Investment Plan, is a way to achieve your financial goals. Through this investment channel, you have to invest a fixed sum of money at regular/frequent intervals. Your wealth is invested in mutual funds on a monthly, quarterly, or six-monthly basis. Such a staggered way to invest, ensures that you save a fixed sum every month, without fail. If you earn a regular salary, you can opt for an automatic debit feature in which a set amount is transferred to your SIP account. That way, you don’t face the hassle of trying to remember to deposit your fixed amount at regular periods.
Your objective in investing through a SIP mutual fund is to create a corpus for the long term. As this is a kind of investment process that has a recurring feature, you tend to inculcate a habit to save and invest in a timely manner. To help you plan your investments in a SIP, in terms of the amounts to invest and the intervals to continue with, you can easily use a SIP calculator, and this is available online. A SIP has become a common channel of investment as it gives you moderately good returns which accumulate over time. Also, it keeps you safeguarded, to some extent, from the volatility of the typical stock market.
How a SIP Calculator Works?
Investors are able to compute absolute values of any amounts invested after a certain period with the help of a SIP calculator. What investors need to feed into online calculators is information regarding the amount invested, the rate of return, and the period of the investment. The SIP calculator gives investors an accurate picture (in terms of an estimate) of returns that an investor may gain relative to a particular tenure and amount of investment. Here are the steps to follow to use a SIP calculator:
- The investor has to feed in information regarding the monthly (or any other interval chosen) instalment to be invested in a given SIP. The minimum amount that any investor can invest in mutual fund investment is Rs. 500 on a monthly basis. The expected return rate should also be entered.
- The next piece of information that investors have to enter into a SIP calculator is the investment term or tenure. If you are opting for SIP investments, the minimum term you can choose is six months. However, experts will recommend that you go in for a longer tenure, as SIPs invest in securities and returns, in the long run, are more rewarding.
- The calculator does its job by computing the estimated investment returns according to the rate of the return of the specific mutual fund scheme. You can only derive a probable return rate (hence, all this is an estimate). This is largely based on a figure that is generated by checking a particular fund’s past track record.
Online and Easy
As with all financial tools and services available online these days, so is a SIP calculator. You can find one at nearly all fund companies. You just have to log in to the company’s website through which you wish to invest. Then, you can easily navigate to the SIP calculator. On most portals, the service of using a SIP calculator is free. The calculator is flexible and you can change amounts to be invested, tenures and intervals. This helps you gauge your potential returns. With a SIP calculator, you can also plan your budget accordingly, knowing how much to keep aside for SIP investment.
A SIP calculator also allows you to plan for a lump sum investment in a SIP. That is, instead of staggering sums invested at intervals, you may allocate a lump sum as a one-time investment in your plan.
More Advantages of Use
You have probably understood how a SIP calculator works and the benefits it can give you. However, just to sum up the advantages of this handy tool, here they are highlighted:
- A SIP calculator is simple and convenient to use. It also facilitates a fast process and you can generate values based on the amount to be invested, the rate of return and the tenure. In this way, you can strategically plan your investment accordingly, and allocate funds wisely.
- The interface to use a SIP calculator is user-friendly, and even if you are new to online use, you get clear instructions on the details to be entered.
- SIP calculators are available on portals of fund companies, and they are free to use.
- First-time investors find investment easy, and a SIP calculator is a smart way to organise your financial plan and goals for the future. If you wish to diversify your portfolio, then knowing how much to invest in different products and instruments is a priority.
One of the most dependable forms of investment is a SIP. With minimal amounts of investment on the lower side, you can invest in a SIP very easily, and this gives you a good opportunity to create more wealth. With small amounts invested, any investor has a chance to invest, and mobilise savings to build a corpus over time. If you want portfolio diversification, as this gives you good returns in the future, one of your investments should be in a SIP. Furthermore, you can plan your investment according to your unique financial requirements better, by using a handy online tool, the SIP calculator. Planning and knowing your investment amounts, and potential returns makes you a confident investor.