For investing in mutual funds, investors are provided two modes of investment. The said modes of investment are the lump-sum mode of investment and the systematic investment plan or SIP. Under the lump-sum mode, you need to make a one-time payment for the purpose of allocating funds to the mutual fund plan you signed up for. This mode of investment can be stressful if you don’t have access to the required amount of investment. Regardless of your financial situation, you must invest the stipulated amount under lump-sum investments. Systematic investment plans (SIPs), on the other hand, work differently.
Under SIP, you can choose to make payments at regular intervals, making them different from lump-sum investments. For your SIP payments, you have the option of leaving a standing instruction with your bank. Through this feature, a certain sum is deducted from your bank account automatically on a stipulated date. Thanks to this, these plans are a preferred way of investing in mutual fund schemes. All that’s required for choosing this mode of investing apart from having a financial goal is to determine the required amount for investment. In case you haven’t determined the amount required for the purpose of investment, you could use SIP calculators. It is easy to find these calculators through a simple Google search.
What are SIP calculators?
These calculators can be defined as online tools that are known for helping both experienced and fresh investors to get an estimate about the returns that you can earn against the mutual fund scheme where the fund allocation is carried through the SIP mode. A systematic investment plan calculator provides investors with an estimate of the returns that are generated through investment in mutual funds.
However, it is very important to remember one thing about the usage of SIP calculators. The said fact is that the returns generated by the different variants of mutual fund schemes are dependent on factors such as market conditions.
How do they work?
For using a SIP calculator, you need to enter the values. The values that you are required to enter for calculating are the duration you can keep on investing, the frequency in which you want to invest in the mutual fund scheme, the investment amount, and the returns you expect on the mutual fund investment. But just using a SIP calculator is not enough. It is imperative on your part to use the right type of SIP calculator. Generally, there are four types of SIP calculators. They are:
What are the four types of SIP calculators?
- SIP calculators:
One of the major advantages of SIP is that small and regular investments in your systematic investment plan can fetch you higher returns over time. With the help of this calculator, you can see how this is possible. This calculator offers you an insight into things your total investment amount, your income against your investment, and the total maturity amount. It is possible to do this task easily by entering information such as the monthly investment amount, expected rate of return, and tenure.
- SIP advanced calculators:
SIP advanced calculators are known for furthering financial planning by calculating your investment and profit after taking inflation into consideration. By taking inflation into account, you are provided with a better and more realistic picture of the inflation-adjusted earnings you made. All that’s required of you is to enter the monthly investment amount, expected rate of return, expected rate of inflation, and tenure. As a result, you will be provided with the total investment amount, total earnings on the investment, maturity amount before inflation, and maturity value after inflation.
- SIP need calculators:
For calculating how much you need to save through SIPs to achieve your financial goals, use a SIP need calculator. To determine how much you need to save, enter your financial goal amount, expected rate of return, and the years you have given yourself to achieve the goal. Then, the SIP need calculator will show the required monthly investment amount. Simply put, makes it easy for you to plan your SIP investments.
- Delay cost calculator:
In case you are thinking of delaying your SIP or want to see the impact of delaying your investment, use this type of SIP calculator. The delay cost calculator is known for taking into consideration your investment tenure, monthly investment amount, expected rate of return and the delay in the investment year while providing the results. Things like your total investment amount, your maturity amount for the investment after delayed years, the cost of delay, and the maturity amount for the investment in case you were to start today. Hence, in case you are confused about whether to invest, this type of calculator is sure to make you rethink your priorities.
Moreover, to ascertain the expense ratio and exit load, a SIP calculator will not offer any solution. Also, all they are known for giving is a rough estimate of the amount of maturity that the scheme may generate for the monthly SIP payment.