SIP Calculator | Systematic Investment Plan Calculator

A systematic Investment Plan (SIP) is basically a process where a certain fixed sum of money can be invested in mutual funds in regular intervals of time. This can usually be done in a weekly, monthly, or quarterly manner. 

SIPs are a method of investing in mutual funds and it is a recurring investment process that isn’t one-off.

What is a SIP Calculator?

A Systematic Investment Plan Calculator is a financial tool that allows an individual to determine the returns that can be availed when funds are invested in tools such as this one. An estimate or an idea, on the particular returns that can be generated on their mutual fund investments, can be calculated with the utilization of this tool. 

It lets you know approximately how much you would need to invest in order to earn the targeted amount. 

This tool is very helpful as it works quickly in a matter of seconds and computes financial calculations that are complex in an automatic, simplistic manner. All the user needs to do is provide the factors of input in order to reach the resulting output that is required. 

How can a SIP Return Calculator help you?

Many mutual fund experts have said that Systematic Investment Plans are a more lucrative method of investing as compared to a lump sum amount.

  • Saving money and becoming financially disciplined is a good benefit that can be received with this tool. 
  • SIP Return Calculators assist individuals in figuring out the amount of money that they may want to invest. The total amount that has been invested is also shown alongside it.
  • An approximate estimate of the returns that are to be received is calculated.
  • When you invest through SIP, the timing of the market is not a problem at all as these investments ensure that a higher number of units are procured and purchased when the price is lower and that lower quantity of units are bought when the market value is higher.
  • Investors can expect suitable returns without any worries in relation to the volatility of the market.
  • It is much easier to invest in mutual funds through SIPs.

How do SIP Calculators work?

The formula that the SIP Calculator uses is, 

M = P × ({[1 + i]n – 1} / i) × (1 + i).

M stands for the amount received upon maturity.

P is the amount that is invested at periodic intervals of time.

n stands for the number of payments that have been made by the individual.

i denotes the periodic rate of interest.

A general example to portray an idea on how the SIP Calculator works would be, 

If an investor wants to invest 1000 per month for a time period of 12 months at a rate of periodic interest of 10%, 

The monthly return rate would be :

10% / 12 = 0.00833


M = 1000 × ({[1 + 0.01]¹² – 1} / 0.01) × (1 + 0.01)

12670 is the approximate amount that would be received for a year.

Some additional key points that may help while investing are, 

  • Identifying and looking for the accurately suitable mutual fund to begin investing in, is a vital step.
  • Decide the duration or the time period that the individual wants to continue investing for.
  • Ensure that investments are done regularly in a continuous manner.

Frequently Asked Questions

Q1. What is the amount of money that can be invested in a SIP?

Ans. There is no fixed maximum aggregate or amount that can be invested in a SIP. There is a minimum standard of 500 rupees that the individual can invest on a monthly basis.

Q2. Are modifications to my SIP amount allowed?

Ans. The SIP investment helps investors check their returns and the SIP amount can be modified anytime in a way where they can increase or decrease the money that has been invested.

Q3. What is the maximum holding period of a SIP?

Ans. SIPs can be invested in for as long as the investor requires as there is no maximum duration but the minimum tenure that is in place is 3 years.

Q4. Are only equity mutual fund investments allowed by SIPs?

Ans. No. SIP allows individuals to invest in hybrid and debt mutual funds in addition as well.

Q5. What are the different categories of SIPs that are available?

Ans. In the market, there are a variety of SIPs such as, 

  • Flexible SIP – Certain scenarios may come into play where it may not be possible to invest the same, particular amount of money every single month. This is where the fund invested can be altered as per the individual’s cash flows and their personal preference.
  • Top-Up SIP – The amount of SIP installment can be modified by a certain, specified amount or percentage which is fixed at intervals that have been pre-defined. This is useful when there is an increment in the income that may be received by the individual, as it allows them to invest a higher amount of money.
  • Trigger SIP Investing can be started on a specified date, Net asset value, during an event or when there is a set index value with this type of SIP.
  • Perpetual SIP – Investors can go on investing and not have to worry about setting an end date to their SIP investment with this option. It is beneficial for users who aren’t interested in investing for a fixed duration of time.

Q6. Can a SIP be renewed?

Ans. Automatic renewal of SIPs can be done and companies also offer an option where the auto-renewal feature can be canceled.

Q7. Are mutual funds similar to SIPs?

Ans. The misconception here is that many people seem to go by the notion that mutual funds and SIPs are the same or that they are completely different. SIPs are simply a style of investment where they act as a vehicle that ultimately allows an individual to periodically invest in any scheme or fund. They are not funds or stock avenues.

Q8. Can investments in a SIP be discontinued or paused? 

Ans. This can be done as mutual fund companies allow investors to cease or pause their SIP investments for a specified duration.

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