Predicting financial performance and growth of your investments is both exciting and beneficial. Being able to find out how much your wealth will grow in the future allows you to know your financial worth and also helps you to make informed financial decisions.
The SIP calculator is one such tool that helps you find out the potential returns on your SIP investment and plan your finances accordingly. If you do regular SIP investments or plan to begin one, this guide will help you in calculating your returns.
What is the SIP Calculator?
The Systematic Investment Plan calculator, or SIP calculator, is an innovative financial tool. It is designed to help investors calculate their return on mutual fund investments. Using this calculator tool, you can find out how much you will earn from your investments at the end of the specified tenure.
The calculator is a user-friendly tool which is freely accessible. Using it, you can project your annual returns on investment and plan your finances systematically.
How Does the SIP Calculator Work?
The SIP calculator is a reliable and trustworthy tool for calculating returns on investment, as it operates based on a mathematical formula. The formula considers compound interest to give you near-accurate results.
The SIP calculator uses the following formula.
FV = P [ (1+i)^n-1 ] * (1+i)/i
Where,
FV= face value
P= Investment amount
i= Rate of return
n=Number of instalments
Let us consider an example to understand how the SIP calculator works.
Assume that you want to invest ₹2500 per month for 24 months at an interest rate of 12%. In this case, the return on investment will be calculated as follows:
FV = 2,500 [ (1+0.01)^24-1 ] * (1+0.01)/0.01
FV= 67,730
Invested amount= 60,000
Returns= 7,730
Advantages of Using the SIP Calculator
As per the reports of AMFI (Association of Mutual Funds India), the total investment in SIP for the FY 2024-25 was ₹2,89,352 crores. With such huge amounts being invested in SIP, the SIP calculator becomes crucial for all investors. Here are the benefits that one can reap by using the calculator.
- The mutual funds SIP calculator helps you to project the return on investments. Thus, you can find out your estimated income in the future.
- It also helps you to manage your finances and plan your expenses based on the potential returns from SIP investments.
- The tool is free and easily accessible. Thus, you can benefit from it without any user charges or fees.
- Using the calculator, you can calculate the earnings even before investing. Thus, it allows you to compare the returns from various mutual fund options and choose the best one.
- It saves your precious time, which would have otherwise been wasted in manual calculations.
- The calculator also enables you to project the potential risk on investment and make safer decisions.
Summary
Investment decisions are a critical part of your life and require careful consideration and estimation. With the SIP calculator, you can very conveniently calculate your potential earnings on SIP investments. Estimating these earnings allows you to plan your finances and plan out the expenses thoughtfully.
This calculator is no magic wand but a thoughtfully designed tool based on mathematical formulas to help you project earnings and make wise financial decisions.
