Today, many people are investing in Mutual Fund SIPs, also known as Systematic Investment Plans. SIP is one of the easiest ways to invest in mutual funds. It allows you to invest money in instalments. By investing in a Mutual Fund SIP, you can build a significant fund for the future. Some SIPs can be started with as little as Rs 100. You can also increase your investment amount anytime or pause your SIP whenever needed.
However, many people are often confused about SIP calculations. It can be challenging to figure out how much money you will have in the future.
How Does the SIP Calculator Work?
The SIP calculator helps investors determine how much return they will receive on their investment in the future. Most people invest in mutual fund SIPs for 20 to 30 years to build a substantial fund for the future.
Currently, mutual fund investors can expect an estimated return of 12 to 14 percent. However, this return depends on the fluctuations of the stock market.
What Does the SIP Calculator Do?
The SIP calculator gives you an estimate of the maturity amount you will receive in the future. However, it does not account for the expense ratio, which is a fee you pay when investing in mutual funds.
The calculator allows you to estimate the maturity amount based on the expected annual return. It also helps you determine how much money you need to invest each month to reach your desired fund.
SIP Calculation Formula
The SIP calculation uses a simple formula:
M = P × {([1 + i]^n – 1) / i} × (1 + i)
Where:
M = Amount to be received at maturity
P = Amount to be invested every month
n = Number of months for the investment
i = Interest rate received during the period (which depends on stock market fluctuations)
What is SIP?
SIP stands for Systematic Investment Plan. It is a way to invest in mutual funds by contributing a fixed amount regularly, instead of paying a lump sum.