The power of planning: How to use an SIP calculator to plan your investments?

Failing to plan is planning to fail.

Proper planning is a key to success in any pursuit, and financial planning is no exception. And, with the increasing importance of financial security, having a sound investment strategy can do wonders.

Thus, if you are planning to start your investment journey, Systematic Investment Plans (SIPs) can prove to be a good option. Investing in mutual funds through SIP will not only encourage financial discipline but can also help in building wealth over time. However, the question arises, how much of your monthly income should you invest in SIP? Well, this is where an SIP calculator can help your finances. So, what is an SIP calculator? Keep reading to learn more.

What is an SIP calculator and how does it work?

An SIP calculator is a tool that helps in estimating the returns on your SIP investment. To calculate the potential future value of your investment, the SIP calculator takes into account the estimated rate of return, your investment amount and the duration of your investment.
The online SIP calculator uses the following formula to calculate the future value of your investment

FV = P x {[(1 + r) n – 1] ÷ r} x (1 + r)
Here,
FV - Future value of investment
P - Principal amount invested each month
r- Expected rate of return
n- Total number of payments

What are the advantages of an SIP calculator?

Helps in making informed decisions: Investment planning plays a crucial role in helping you achieve your financial goals. By using a mutual fund SIP calculator, you can plan your finances wisely and determine the amount to be invested to achieve your financial objectives with minimum hassle.
Instant output: Calculating the returns on your investment manually can be a cumbersome task. With the help of an SIP calculator, you can easily get the estimated future value of your investment within seconds.
Easy to use: The online SIP Calculator is very easy to use. All you have to do is enter a few parameters such as your investment amount, expected rate of return and investment horizon to get an estimate of the returns.

How to use Bajaj Mutual Fund calculator?

Here’s a step-by-step guide on how to use an SIP calculator:

Step 1 - Enter the amount that you wish to invest every month.
Step 2 - Choose the duration of your investment and expected returns.
Step 3 - Once you enter these inputs, the SIP calculator will show you what your invested amount is, what its future value will be, and what your returns will be for that chosen period.
Step 4 – To arrive at the SIP amount that suits your investment goals, you can simply change the amount you plan to invest every month or the tenure for which you plan to invest.

By using an SIP calculator efficiently, you can get an estimate of how much you’ll need to invest monthly to achieve a specific financial goal in the desired period.

To sum it up, SIPs are one of the most preferred ways of investing in mutual funds. It can help you achieve your long-term financial goals such as funding you child’s higher education, planning their wedding, buying a car, or saving for your retirement. And, with the help of an SIP calculator you can plan your investment wisely and reach your financial goals with ease.
Investors must however note that all these returns are indicative and based on assumptions. Actual performance will depend on market conditions, type of scheme selected, expense ratio of the scheme etc. Accordingly, investors must check with their financial advisor on undertaking SIP investments and should not solely rely on SIP calculator to guide them on their investments.

FAQs:

What if I invest Rs.15,000 per month in SIP for 15 years?

Assuming the rate of return to be 12% per annum, you can build a corpus of approximately Rs.75 lakhs by investing Rs.15,000 per month in SIP for 15 years. (For illustrative purpose)

Can I withdraw SIP anytime?

Yes, you can generally withdraw your SIP anytime. However, you must note that there may be certain conditions or charges associated with early withdrawals. Thus, before investing in an SIP, it’s essential that you understand the terms and conditions of the investment, including the lock-in period, if any, exit loads, and other charges that may apply in case of early withdrawal.

Is SIP tax-free?

Although SIPs are not a tax-saving instrument, the investments made through SIP in certain mutual funds can offer tax benefits. For example, the investments made in Equity Linked Savings Scheme (ELSS) funds through SIPs are eligible for tax benefits, subject to the overall limit of Rs.1.5 lakh per year under Section 80C. However, you must note that the tax benefits can only be availed if the investment is held for a minimum of three years. This is because the money gets locked in, and thus, the investor won’t be able to liquidate their investment during the lock-in period.

What is a step up SIP?

A step up SIP is a variation of the traditional SIP where you can increase your investment amount by a fixed rate at regular intervals. For instance, you can choose a 10% annual step up, wherein your SIP amount will automatically increase by 10% every year. This approach can align your investments with rising income, boosting long-term wealth creation. To understand the potential growth of your investment with these steady increments, you can use a step up SIP calculator. Based on your starting SIP amount, investment horizon and step-up rate, the calculator estimates how a step up SIP can potentially boost your final corpus.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. This document should not be treated as endorsement of the views/opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.