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HOW TO CALCULATE YOUR MUTUAL FUND RETURNS USING SIP CALCULATOR?

Several new investors often wonder how much they would be able to reap from their SIP investments. A good option to calculate the future value of your SIP investment is by using an SIP return calculator. If you are wondering what is SIP, SIP, or systematic investment plan is a tool to invest in mutual funds. This article will cover how to calculate returns on your mutual funds using a mutual funds sip calculator.

An SIP calculator is described as a financial tool that aids to calculate the returns earned on SIP instalments. Under SIP investment, an investor invests a particular amount at specific intervals for a predefined period. The SIP calculator articulates how much you would need to invest each month in reaching a target corpus. In short, it provides a roadmap to achieve various financial goals.

The formula of calculating MF returns via return calculator

An SIP calculator has the following formula:

FV = (P * ((returns / 100) / 12)) / (Math.pow((1 + ((returns / 100) / 12)), (year * 12)) – 1);

Where,

FV = Future value of the investment

P = SIP investment amount

Let’s understand this better with the help of an example:

Dinky wants to invest Rs1,000every month for 12 months at12% interest rate. The future value of her SIP investments (M) would be:

M = 1,000 X ({[1 + 12%]12  – 1} / 12%) x (1 + 12%).

Therefore, M = Rs25,293 (approx.).

Instead of going through the trouble of calculating returns on investments that involves complex calculations, Dinky can simply use anSIP calculator to save time and effort.

The rate of interest on an SIP investment is likely to differ as per market conditions. It may upsurge or drop, that tends to change the estimated returns.

How to use an SIP calculator?

An SIP return calculator generally has three input boxes. These are:

  1. Investment tenure
  2. Monthly investment amount
  3. Expected annual returns

You need to input the amount you wish to invest in mutual funds via SIP. It can be as little as Rs100. Next, input the duration of your investment tenure such as eight years, ten years, and so on. Though SIPs do not have any lock-in period, experts often advise individuals to stay invested for a longer duration in order to achieve optimum capital appreciation. Lastly, input the expected rate of return on the SIP investment.

Once you input these values, hit on the calculate button to evaluate the expected corpus that can be earned in a specific period. You can also adjust these values to discover what works best for you as per your personal goals and budget.

Most mutual fund SIP calculators also include an additional button known as ‘Adjust for Inflation’. You can use this button if you want to know the true value of your SIP investment in the future after taking inflation into account. It is always suggested to consider inflation in your calculations as it provides a more realistic picture of your earnings.

SIP is the answer to prevent pitfalls of investing in the volatile equity markets and still enjoy considerate returns. Remember, the longer you stay invested in SIP, the more returns you gain. Happy Investing!

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