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Wednesday, April 22, 2020


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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