A SIP or Systematic Investment Plan helps make small investments in mutual funds at regular intervals that helps grow your money in the smartest possible way. A mutual fund SIP calculator is an online tool that helps estimate returns from SIP investment. You can easily use a mutual fund SIP calculator to see the growth of your investment if you choose to invest today.
What is a Mutual Fund SIP Calculator?
The mutual fund SIP calculator works on the target amount and the investment amount approach. This investment amount approach is the most widely used one, wherein an investor must input the investment amount, the expected return, tenure, and the step-up amount. The target amount approach utilizes a target amount the investor wishes to achieve in a fixed duration of time, to estimate the required current investment. This tool can be used for a range of investments including investment in Gold Funds that are primarily based on the gold price in India. Gold is a great investment; however, it is important to be sure of the expected returns and the step-up rate on the gold price in India prior to making an investment.
Now, a mutual fund SIP calculator helps estimate return in reference to the maturity amount based on three different scenarios of growth. They are above average, below average and average. Additionally, it must be noted that a SIP calculator only gives the estimate based on the inputs which have been provided. A mutual fund SIP calculator in no way guarantees any returns. The returns from any type of mutual fund depend on the actual performance of a fund. Also, the return from an investment in a mutual fund can be lower or higher as compared to the estimate provided by a mutual fund SIP calculator.
How Does a Mutual Fund SIP Calculator Work?
The online mutual funds SIP calculator helps calculate the maturity amount in addition to the wealth that can be gained from a particular mutual fund investment. You can choose to enter a target amount which matches your financial growth and then reverse calculate the monthly amount that can be invested for a given rate of growth and tenure.
Benefits of Mutual Fund SIP Calculator
Analysis and research are significant prior to making an investment decision. Also, it is vital to estimate the potential returns before investing as it helps analyze if the investment will prove to be profitable or not. In addition to this, it is important to make sure that the investment objective of the asset and the investor’s objective are aligned well. This enables investors to make the right choice of asset that helps them realize goals better and faster.
Estimation of the maturity amount: A mutual fund SIP calculator helps an investor get an estimate of the potential returns by the end of the duration of investment. It also helps estimate the monthly investment amount if you are aware of how much you wish to earn as an investor by the end of the investment tenure.
Easy to use: A mutual fund SIP calculator is easy to navigate and use. You simply have to enter the required details that help estimate the returns appropriately. Also, the calculator saves the time of an investor by saving them from performing complex calculations. This calculator helps estimate the maturity amount and the amount of monthly investment within a span of few seconds.
Tubular and graphical representation: A mutual fund SIP calculator shows the estimate of returns in both tubular and graphical forms. This helps an investor interpret returns and make informed choices in a hassle-free way.
Maturity amount based on scenarios of growth: The mutual funds SIP calculator estimates return based on three main scenarios of growth. These scenarios are based on below-average, average and above-average returns. Therefore, the potential investors can choose a scenario which aligns with the requirements of investment and start investing.
How to Calculate a SIP Return?
SIP returns can be calculated utilizing the absolute return, CAGR or annualized returns. However, CAGR is by far the most effective method to estimate the returns on a Systematic Investment Plan. CAGR stands for compound annual growth rate and is the rate at which an investment grows every year for the whole tenure of the investment.
The formula for calculation of SIP returns is as follows:
CAGR = (Ending value/starting value) ^ (1/number of months or years) – 1*100
On a Parting Note
A mutual fund SIP calculator helps estimate the potential return using the formula for compound interest. The mutual funds SIP calculator helps consider the number of times compounding is applicable and estimates the potential returns. Moreover, a mutual funds SIP calculator requires entering the monthly amount they wish to invest and the duration in years along with the expected return rate on a Systematic Investment Plan. You can compare multiple scenarios of return using the free online mutual fund SIP calculator and make the right investment decision, helping earn significant returns.
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