Individuals
new to the investing world might think that SIP, or Systematic Investment Plan,
and mutual funds are the same. However, that’s not the case asthe former is
merely a method of investing in mutual funds.
What
is an SIP?
SIP is an investment
vehicle offered to investors wherein an individual can invest a specific amount
in his/her desired mutual fund at defined periodic intervals. The specified
amount gets debited from the investor’s account and is credited into the fund’s
account.
Individuals are often
worried if they are investing the right amount in their desired securities.Thus,
they are often left apprehensive if their SIP investment will meet their
long-term financial goal. This is when a mutual fund return calculator or an SIP
calculator comes into the picture.
An SIP calculator calculates
the estimated returns on mutual fund investmentsdone via SIP mode. Simply put,
SIP calculators lead the roadmap to achieve financial freedom.Such tools assist
investors in determining the amount they should invest to meet a goal and give an
accurate figure on the total corpus generated in the tenure, apart from
providing an estimated value on returns.
Gone are the days when
relationship managers, distributors, or agents wouldconfuse their clients by
complicating the calculations and promising unrealistic returns. An SIP
calculator smartly empowers investors in their financial planning.Let’s
understand how to use this tool.
How
to use an SIP calculator?
An SIP calculator generally hasthree input boxes.
These are:
1.
Monthly
investment amount
2.
Investment
tenure
3.
Expected
annual returns
You need to enter the
amount you wish to invest in mutual funds via SIP. It can be as little as
Rs500. Next, you need to input the duration of your investment such as 10
years, 12 years, and so on. Though SIPs do not have any lock-in period, fund
experts often advise investors to stay invested for a longer duration to
achieve optimum capital appreciation. Finally, you need to input the expected
rate of return on the investment.
Once you input these
values, hit on the calculate button to determine the expected corpus that can
be earned in a specific period. You can also adjust these values to discover
what works best for you based on your goals and budget.
Some SIP calculators
also include an additional feature known as ‘Adjust for Inflation’ button. You
can use this option if you want to know the true value of your investment in
the future after considering inflation. It is always suggested to consider inflation
in this calculation as it provides a more realistic value of your earnings.
SIP is the answer to
prevent pitfalls of investing in equity
mutual funds and still enjoy considerate returns. Remember, the longer you
stay invested in SIP, the more you gain. Happy Investing!
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