How can you calculate the returns from your SIP investments?

A huge draw of any investment plan is to know the returns from the investments. The motivation for investment becomes stronger, equipped with the knowledge of what you can expect. With this context in mind, you can explore the SIP calculator that can easily calculate within seconds the amount that you can hope to accumulate with your SIP investments. Here, it is worth mentioning that some investors also invest in an ETF periodically. Although ETF investments look somewhat like mutual fund SIP investments, they are different, as an ETF can be traded on the stock exchange at prices that vary throughout the day, whereas a mutual fund SIP transaction is done at the prevailing NAV on the SIP date or on the next working day, if the SIP date happens to be a holiday. Therefore, you need to be clear on the difference between the two, as you cannot calculate returns of an ETF, even if the investment is periodic, with the calculator meant for SIP investments.  

In this article we will explore what an SIP calculator is, and how you can use it. Before we go to the calculator, let us first understand the SIP mode of investment. 

What is SIP? 

SIP or Systematic Investment Plan is a plan through which you can invest a fixed amount at regular intervals in a mutual fund scheme of your choice. The fixed amount can be as low as Rs 500/ and the periodic intervals could be also as per your choice starting from monthly, quarterly, half yearly, weekly etc. There are some mutual funds which also give you a chance to invest daily.  

In order to calculate the returns, you may use a compound interest formula, which is quite inconvenient as sometimes you may want to change the variables like amount, tenor of investment or expected market returns to arrive at the investment value. Calculating the returns with such information gets time consuming and difficult using the formula on a normal manual calculator or even on an excel sheet.  An SIP calculator makes this calculation extremely easy as we shall see in the next section.  

Working with an SIP calculator 

An SIP calculator is an online tool that you can access freely on websites of most AMCs. The calculator can give you the returns on your SIP investment in two ways.  

One variant of the calculator calculates the amount you can hope to accumulate if you know how much you can contribute in each SIP instalment.  The next type of calculator can be used to plan how much you need to invest periodically when you have a target amount to be saved up.  

To use any of the calculators, you just have to choose the calculator from the online platform and feed in the required details. The details are: 

Your target amount/ or the periodic instalment amount The expected rate of returns on your investments The tenor of your investment The frequency of your contribution 

The moment you click on ‘calculate’ after entering all the details, the SIP calculator gives you the required result in a fraction of a second. Note that all the details you have entered in the calculator can be changed multiple times in order to get the best mix for you. 

For example, let us say you had tried the calculator with a Rs 5000/- SIP and then you want to see what the change will be if you can contribute Rs 7000/- per month, then you can immediately find out the same by changing the input.  Note that, as mentioned above, returns from periodic ETF investments would need a different type of calculator as SIP is not allowed in ETF.  

Go ahead and explore the SIP calculator and see how you can tweak your investment plan in order to align with your financial goals.