Plan your SIP with SIP Calculator

SIPs have made life easier for retail investors. Even if you want to invest Rs. 100 in a fund per month, you can do it, isn’t that amazing? So, there are no more barriers for retail investors who want to invest in the market but earlier couldn’t due to high capital requirements. Almost every fund has SIP options and lump sum options and you can choose at your convenience how you want to invest in the fund. This article will help you understand how SIPs work and how you can plan them using the SIP calculators. 

What is SIP? How does it work?

Before understanding how to plan your SIPs, it is better to understand how SIPs work and what are they. So, SIPs stands for Systematic Investment Plans and as the name suggests, SIPs help people invest in a disciplined manner every month a particular amount in the funds of their choice.

For instance, you invest Rs. 5000 in an equity fund every month for 5 years. The fund offers a 10% per annum return on average. So, at the end of 5 years, your investment will amount to Rs. 390412. Here Rs. 3 lakhs is the total investment you have made in the fund that can be derived by Rs. 5000 *12* 5 years = Rs. 3 lakhs. The Rs. 90412 is the returns that your fund has generated over these years. So, instead of investing Rs. 3 lakhs in one go, you invest in equal parts over a prolonged period. 

How SIPs can be planned?

When you are investing in any mutual fund funds via SIP, you need to keep in mind certain things – 

1. Firstly, you need to derive the amount you want to invest. You can do it in two ways using the SIP Return Calculator. Either you can fix an amount that you will invest every month or you fix an investment goal that you want to achieve and derive the monthly SIP investment required for the same. 

If you have a budget say Rs. 10000 in a month, then you can calculate the returns and total wealth accumulated at the end of the investment tenure using the SIP Calculator. So, suppose you want to invest for 10 years in debt funds, the average return that the debt funds offer is around 6%. So, considering that, the amount you can accumulate at the end of the ten years is around Rs. 16.47 lakhs out of which Rs. 12 lakhs is the invested amount and Rs. 4.47 lakhs is the returns generated by the fund. 

Suppose you invest the same amount but into an equity fund, where the return is around 12% then at the end of 10 years, you can accumulate around Rs. 23.33 lakhs, the investment being the same as Rs. 12 lakhs. So, you can use the SIP return calculator to find out returns for different SIP investment strategies. 

The second method of finding the amount you need to invest via SIP is to derive the investment goal amount. Suppose, you want to accumulate Rs. 1 crore in the next 15 years and you want to have a balanced approach where the return will be around 8% p.a. So, using the SIP return calculator you can derive the monthly SIP amount which will be around Rs. 28707. 

1. Once you know the amount you need to invest or you want to invest, keep that aside every month so that you do not miss your SIPs. 
2. Always check the expense ratio, and exit load of the funds before you start within the SIPs. 

Investing a huge amount in one go or lump sum may not be possible for most retail investors. However, SIPs don’t put much pressure on the investors’ pockets. Other benefits SIP investments have like rupee cost averaging when the market is moving up and other benefits. 

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