How to make the Best Use of SIP Calculator (Systematic Investment Plan)

13 Nov 2021|

2 min read |

by ICICI Securities Team

Introduction

The first systematic investment plan only arrived in the year 2002 in India. Since then, sip has witnessed significant growth, making it an attractive option for those looking to invest for long-term financial needs.

What is a SIP Calculator?

A Systematic Investment Plan (SIP) calculator is a free online tool that can be used to compute the returns you can earn on your mutual fund investments through the SIP route. It gives you a break-up of the invested amount and total returns earned. Using a SIP calculator, you can estimate how much you need to invest every month in reaching a target corpus. It can be a helpful tool to plan your short-term and long-term financial goals.

How does a sip calculator work?

An SIP returns calculator works according to the mathematical formula FV = P [ (1+i)^n-1 ] * (1+i)/i, wherein:

FV= Future value, i.e., the amount one gets upon maturity of a mutual fund scheme.

P= SIP investment amount

i = Compound rate of return

n = Duration of an investment expressed in months

r = Estimated rate of return

How To Make The Best Use Of an SIP Calculator

An SIP calculator requires three different sets of information. These are the SIP amount, SIP duration, and the expected return rate on the SIP per annum. Investors must be sure of these three factors before making use of the calculator.
The SIP amount is not just a measure of the capital one is willing to invest. It also helps one calculate one’s risk exposure, consider one’s income structure, the amount of risk one is willing to bear and more. SIP investment amount is one of the two things that determine the category of investor one falls in.
The tenure and goal of any particular SIP is also an essential factor. It determines the nature of financial needs and the expected gap between investment and the requirement of said investment.
Finally, the expected return rate signifies whether the investor wants to be aggressive or balanced in the investment.
SIP can be used in two ways with the above-mentioned basic information. One is the corpus calculation method, and the other, the contribution calculator.
The SIP corpus method allows you to calculate the corpus of funds they can generate based on the SIP amount and the tenure you are willing to invest. In this method, the SIP data must receive input regarding the monthly amount, step up, if any, annual CAGR return , the tenure of investment, the date of commencement of investment etc.
In the SIP contribution method, the SIP calculator calculates the amount of investment needed to get a specific corpus size at the time of redemption. In this method, the SIP calculator must receive data input regarding the target amount, any step-ups, the annual CAGR rate expected, the tenure of investment, and the date of commencement of investment, among other data.

Additional Read: Why you should use a Systematic Investment Plan (SIP)?

Advantages of Using a SIP Calculator

Now that we have gone through what a SIP calculator is and how it can be used, let us go through some of the advantages of using a SIP calculator:

SIP calculators are simple to use. All you have to do is input the information required, such as the investment amount, expected rate of return and duration, to get what your total corpus will be.
The calculator is free and can be used by anyone to plan their finances.
It can be used to meet financial goals with ease. You can calculate how much you need to save every month to arrive at a corpus that you want to build.
You do not need to submit any additional information apart from the three key inputs required.
It saves you the effort of manual calculation to understand the returns on your investment.
You can also use the SIP calculator in combination with other online calculators to find out the best mode of investment for you. For instance, you can use an FD or RD calculator and compare it with SIP investments to understand how each of these will contribute to your wealth creation.

Conclusion

The use of SIP calculator to gauge one’s requirements for mutual fund investments is a sound strategy, requiring few sets of data. Since SIP calculators are all available online, their use is hassle free, allowing for rapid calculations which provide accurate data for investment planning.

Disclaimer

ICICI Securities Limited has its registered office at ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400025, India, Tel No:- 022 - 2288 2460, 022 - 2288 2470. The non-broking products / services like iLearn and Financial Learning are not exchange traded products / services and ICICI Securities Ltd. is just acting as a distributor/ referral Agent of such products / services and all disputes with respect to the distribution activity would not have access to Exchange investor redressal or Arbitration mechanism. iLearn is not an exchange traded product/service of ICICI Securities Ltd. All disputes with respect to the activity on the platform would not have access to Exchange investor redressal or Arbitration mechanism.

ICICI Securities Ltd. is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. ICICI Securities Ltd. is a SEBI registered with SEBI as a Research Analyst vide registration no. INH000000990. Name of the Compliance officer (broking): Mr. Atul Agrawal, Contact number: 022-40701022, E-mail address: complianceofficer@icicisecurities.com Investments in securities markets are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. ICICI Securities Ltd. and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Such representations are not indicative of future results. The securities quoted are exemplary and are not recommendatory. AMFI Regn. No.: ARN-0845. PFRDA registration numbers: POP no -05092018. ICICI Securities Ltd. acts as a Composite Corporate agent having registration number -CA0113. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund, Corporate Fixed Deposits, Bonds, Alternate investment funds, Tax planning, Succession planning, NPS, IPO, Investment Advisory and Loans related services are not Exchange traded products and ICICI Securities Ltd. is acting as a distributor to solicit these products. Please note, Insurance related services are not Exchange traded products and ICICI Securities Ltd. is acting as a corporate agent to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The non-broking products / services like Research, etc. are not exchange traded products / services and all disputes with respect to such activities would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.