SIP (Systematic Investment Plan) investments are extremely popular in India. The total SIP influx in 2023 in India stood at ₹ 1,83,741 crore, indicating the popularity of SIP investments among Indians. Besides consistently investing in mutual funds through SIPs, investors can cultivate another habit to further improve their SIP investment returns – using an SIP calculator. This article enlists the advantages of using an SIP calculator and helps investors use it to improve their SIP returns.
What is a Systematic Investment Plan?
An SIP is a mode of investing in a mutual fund scheme. It helps investors cultivate a discipline while investing by helping them invest a fixed amount at regular intervals. Investors can choose to invest this income monthly, annually, or weekly. The SIP mode of investment offers several benefits to the investor; one of which is the power of compounding. Investors can significantly grow their returns by systematically investing a fixed amount in a mutual fund scheme for a long term. SIP investments are also flexible; and most mutual fund houses allow investors to start their SIP investments with as less an amount as ₹ 500.
What is an SIP investment calculator, and how does it work?
SIP investment calculators are free online tools that help investors calculate their SIP investment returns before investing in a mutual fund scheme. Investors generally use an SIP investment calculator before they invest in SIP. Doing so helps them plan for their mutual fund investments and decide on the ideal investment amount and tenure. Online SIP investment calculators require investors to fill three fields – their investment amount, their investment duration (in years), and their expected rate of return. It then returns the amount that the investor can earn by the end of the specified investment duration.
How can investors use SIP calculators to improve their returns?
Here is a simple, stepwise process to improve one’s mutual fund returns by using an SIP investment calculator:
- Shortlist a few mutual fund schemes by analysing their features: Firstly, the investor must shortlist mutual fund schemes by analysing their features and their past performances. You can visit the particular mutual fund house’s website to learn all these details.
- Use an online SIP investment calculator to calculate returns: In the next step, you must use an online SIP calculator and entered the required details for every mutual fund to calculate the returns at the end of your investment tenure.
- Change the SIP’s tenure or investment amount if required: At this juncture, it is important to make changes to your investment amount or tenure if you feel that the expected returns do not align with your larger financial goal.
- Compare multiple mutual funds: In the final step, you must compare the returns offered by all the mutual fund schemes that you shortlisted and decide on the one that offers the most returns. You must also decide on an optimal tenure and investment amount for this mutual fund.
As you can see, online SIP calculators mostly come in handy before an investor makes a mutual fund investment. It is advisable for investors to use these online tools before making any mutual fund investment, regardless of the category of mutual fund.