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SIP Calculator - Overview
A SIP Calculator is a tool that helps investors estimate the potential returns on their SIP investments. It takes into account factors such as the invested amount, investment duration, expected rate of return, and compounding frequency. The primary goal of a SIP Calculator is to provide investors with a clear understanding of the future value of their investments based on their chosen parameters.
What is SIP?
SIP stands for Systematic Investment Plan. It's a disciplined investment approach that allows you to invest a fixed amount of money in a mutual fund scheme at regular intervals, such as weekly, monthly, or quarterly. It's often compared to a recurring deposit (RD) in a bank, but instead of investing in a fixed deposit, you're investing in mutual funds.
What Are the Types of SIP?
1. Regular SIP:
Fixed amount invested at fixed intervals.
Most common and straightforward approach.
2. Flexi SIP:
Flexible investment amounts at fixed intervals.
Allows you to adjust your investment based on your financial situation.
3. Step-up SIP:
Gradual increase in investment amount at fixed intervals.
Helps you match your investments with your growing income.
4. Trigger SIP:
Investment triggered when the NAV of a fund reaches a pre-defined level.
Aims to take advantage of market dips.
5. Perpetual SIP:
Continue indefinitely until you actively stop it.
Ideal for long-term goals and passive investing.
How Can SIP Return Calculator Help You?
A SIP return calculator is an online tool that helps you estimate the potential returns on your SIP investments.It takes into account factors like:
SIP amount: The amount you invest each interval.
Investment frequency: How often you invest (e.g., monthly, quarterly).
Expected rate of return: The estimated annual return of the mutual fund.
Investment tenure: The duration of your SIP investment.
How Does Online SIP Calculators Work?
1.Input Information:
You enter the following details:
SIP amount: The amount you'll invest regularly.
Frequency: How often you'll invest (e.g., monthly, quarterly).
Expected rate of return: The estimated annual growth of the mutual fund.
Tenure: The duration of your investment.
2. Calculation:
The calculator uses a compound interest formula to estimate potential returns: M = P × ({[1 + i]^n – 1} / i) × (1 + i) where:
M is the maturity value (projected total amount).
P is the principal (SIP amount).
i is the periodic interest rate (expected rate of return divided by investment frequency).
n is the number of payments (total SIP installments)
3. Results:
The calculator displays:
Maturity value: The estimated total value of your investment at the end of the tenure.
Total investment: The total amount you'll contribute over time.
Interest earned: The estimated earnings from interest.
Benefits of Using Online SIP Calculator
Convenience: Access them anytime, anywhere, with internet access.
Ease of use: Simple interface, no complex calculations required.
Multiple scenarios: Experiment with different SIP amounts, tenures, and expected returns to see potential outcomes.
Goal planning: Estimate SIP amounts needed to reach specific financial goals.
Fund comparison: Compare estimated returns of different mutual funds.
Visualization: See potential growth of your investment over time, often through charts or graphs.
How to Use Vakilsearch's Mutual Fund SIP Calculator
1. Access the calculator: Visit Vakilsearch's website or app and locate their SIP calculator tool.
2. Enter details: Fill in the required fields: SIP amount, frequency, expected rate of return, and tenure.
3. Click 'Calculate': Submit the information to generate results.
4. Review results: Analyze the maturity value, total investment, and estimated interest earned.
5. Adjust inputs: If desired, modify the inputs to explore different scenarios.
SIP Calculation With Example
SIP amount: ₹5,000 per month
Frequency: Monthly
Expected rate of return: 12% per annum
Tenure: 10 years (120 months)
Calculation:
1. Periodic interest rate: 12% / 12 = 1% per month
2. Total SIP installments: 120 months
3. Applying the formula: M = 5000 × ({[1 + 0.01]^120 – 1} / 0.01) × (1 + 0.01) M ≈ ₹11,65,546.52
Results:
Maturity value (projected amount): ₹11,65,546.52
Total investment (amount contributed): ₹6,00,000
Interest earned: ₹5,65,546.52
Explanation:
By investing ₹5,000 monthly for 10 years, you could potentially accumulate a corpus of over ₹11.65 lakhs, assuming a 12% annual return.
The power of compounding plays a significant role, as you earn interest on both your principal and the accumulated returns over time.
FAQs on Online SIP Calculator
No, SIP investments are not entirely tax-free. However, they offer tax benefits compared to other investments. Long-term capital gains (LTCG) from equity-based SIPs exceeding one year are taxed at 10% with no indexation benefit. Debt-based SIPs have different tax treatments, with short-term gains (less than 3 years) taxed at your income slab and LTCG taxed at 20% with indexation. Consult a financial advisor for detailed tax implications on specific SIP investments.
There's no fixed maximum tenure for SIPs. You can choose any duration according to your investment goals and risk tolerance. Most platforms allow tenures up to 30 years or even perpetual SIPs that continue indefinitely until stopped.
Yes, SIPs can invest in hybrid mutual funds that combine equity and debt assets in varying proportions. Hybrid funds offer diversification and balanced risk-return profiles, suitable for moderate investors.
Many platforms allow you to modify your SIP amount through their online portals or by contacting customer support. Some may have minimum or maximum limits for adjustments.
Extending your SIP duration is usually simple. You can typically choose this option on the platform or contact the fund house. Consider your financial goals and revised tenure before extending.
SIP 'interest' isn't technically interest but your investment's total returns. These depend on:
