How to Use the SIP Calculator
Our SIP calculator helps you get a clear idea of the potential returns on your monthly investments. To use the calculator, you need to provide three key inputs:
- Monthly Investment: The amount you plan to invest every month.
- Expected Annual Return (%): The annual rate of return you expect from your investment. This is an estimate and can vary based on the type of fund and market conditions.
- Investment Duration (Years): The number of years you plan to stay invested.
Once you enter these values, the calculator will instantly show you the total amount you have invested, the estimated returns you have earned, and the total future value of your investment.
Understanding SIP Returns
SIP (Systematic Investment Plan) is a disciplined way of investing in mutual funds. It allows you to invest a fixed amount regularly, which helps in building wealth over the long term. The two main factors that contribute to SIP returns are the power of compounding and rupee cost averaging.
The Power of Compounding: Compounding is when you earn returns not just on your principal amount but also on the accumulated returns. The longer you stay invested, the more your money grows, thanks to the magic of compounding.
Rupee Cost Averaging: Since you invest a fixed amount every month, you buy more units when the market is low and fewer units when the market is high. This averages out your purchase cost over time and protects you from market volatility.
Frequently Asked Questions (FAQ)
What is a SIP?
A SIP (Systematic Investment Plan) is a method of investing in mutual funds where you invest a fixed amount of money at regular intervals (usually monthly). It helps in disciplined investing and benefits from the power of compounding and rupee cost averaging.
How does this SIP return calculator work?
This calculator estimates the future value of your SIP investments using a compound interest formula. You need to provide the monthly investment amount, the expected annual rate of return, and the investment duration in years.
Are the returns from a SIP guaranteed?
No, SIP returns are not guaranteed as they are linked to market performance. The returns can vary based on the performance of the mutual fund scheme you have invested in. This calculator provides an estimate based on the expected rate of return you provide.
What is rupee cost averaging?
Rupee cost averaging is an investment strategy where you invest a fixed amount of money at regular intervals. When the market is down, you buy more units, and when the market is up, you buy fewer units. This averages out the cost of your investment over time and reduces the impact of market volatility.
Can I use this calculator for lumpsum investments?
No, this calculator is specifically designed for Systematic Investment Plans (SIPs). For lumpsum investments, you would need a different calculator that calculates the future value of a single one-time investment.