SIP Calculator

What is SIP Calculator?

A SIP calculator is a free online tool that can help investors calculate the returns they would earn on their mutual fund SIP investments. The SIP return calculatorcan also guide investors as to how much they would need to invest systematically every month / or any other frequency, in case they have a goal target amount for their future.

Simply speaking, the SIP calculator can be very effective in automatically calculating complex financial calculations. All the investors has to do is provide some few inputs and the mutual fund SIP calculator throws the result instantly.

Let us now see how to calculate SIP returns using the SIP calculator online

Generally a SIP return calculator has 3 input boxes - Monthly investment amount, investment period and the expected returns.

Let us understand this through an example –

• Monthly investment amount - Enter the monthly SIP amount, say Rs 10,000
• Investment period – Enter the no. of years for which the SIP would continue. For example – 20 years
• Expected returns – Suppose 12% assuming the investor is investing in an equity mutual fund.

After entering the above amount, the moment you press the submit button, it displays the result. In the above example, it is Rs 99.91 Lakhs. That means, by saving only Rs 10,000 a month for 20 years, with expected return of 12%, the investor can generate a corpus of Rs 99.91 Lakhs.

We have used the Future value formula. We have considered the first working day of the month for SIP calculation.

By adjusting the above estimates, investors may check what could be the returns if the expected returns or the investment tenure is increased / decreased. This is so simple to know using a SIP calculator.

What are the benefits of using a SIP calculator?

A mutual fund SIP calculator provides the following benefits –

• Helps you plan your investments based on the SIP amount and investment tenure.
• SIP calculator gives a correct estimation of the total value of investments at the end of the SIP tenure.
• SIP return calculator shows accurate results for complex calculation and thus saves time.
• Using a SIP calculator you can plan your financial goals.

As you can see how easy it is to know the future SIP returns if you use the mutual fund SIP calculator. But before we proceed further, let us discuss what a mutual fund SIP is.

What is mutual fund SIP or systematic investment plan?

A mutual fund SIP is a disciplined way of approaching your mutual fund investments. Through SIP, the investors can invest a pre-fixed amount in mutual fund scheme/s of their choice for the number of years that they want.

To start a mutual fund SIP, the investor need to fill up the SIP form and select the Auto-debit feature which ensures that the SIP amount is transferred to the scheme account by debiting your bank account on the chosen date. While filling up the SIP form, investors can also choose the SIP frequency. It can be monthly (most popular), fortnightly, quarterly or even daily.

The aim of investors when they start the SIP should be to create wealth in the long term which can help in meeting various goals like, child’s higher education, retirement or simply wealth creation. You can actually plan these goals, by calculating the SIP amount using the SIP calculator that need to be saved over the years. SIP is simple, yet powerful weapon which slowly but surely helps investors create wealth without worrying much about market volatility.

What are the various types of mutual fund SIP?

Regular SIP – Investor can choose a time period (in years) and the SIP amount and submit the SIP form to the mutual fund company. Based on the no. of years of investment, the SIP amount gets debited from investor’s bank account and units are allotted till end of the SIP period. Let us see how to calculate the expected future corpus of a regular SIP.

Enter the SIP amount (say Rs 2,000), frequency (say 10 years), and expected returns (say 12%) in the mutual fund calculator. Once the submit button is pressed, the excepted corpus will show as Rs 464,678. Based on this amount the investor can plan a future goal. This is the simplest form of a mutual fund SIP

Flexi SIP – Some AMCs provide flexible SIP to investors. In this type of SIP, the SIP amount is not fixed. At the start, the SIP amount can be of investor’s choice, say Rs 5,000 a month and one can also decide the investment period. However, the future instalments are decided by the AMC based on the market levels and average acquisition cost of SIP units. That means, each SIP instalment amount will be different. However, the future value of these SIP investments is difficult to estimate.

Therefore, the investor can calculate only the real returns by inputting the actual monthly SIP instalment and the SIP date in mutual fund calculator. Once input is given, the SIP calculator will display the actual returns (in XIRR %) that the SIP is generating.

Perpetual SIP – Perpetual SIP is like regular SIP only. The only difference is that here the investment period is not mentioned. One can continue the SIP as long as one want. Please note that the SIP can be stopped by writing to the mutual fund company and the action can be expected within 15 days.

In a perpetual SIP, finding the expected corpus is not possible as the investor is not sure how long the SIP will be continued. Therefore, what would be the investment period input in the SIP calculator is not known. What should be done in that case?

In this case, the investor can estimate the future returns based on various estimated no. of years. For example what would be the return if the SIP is continued for say 5,10, 15, 20 or 25 years. Accordingly the investment years input need to be given in the SIP calculator.

Assuming the monthly SIP amount is Rs 5,000 and the expected returns 12%, the investor first inputs the investment period as 5 years, then 10 years and so on and gets the following results from the SIP return calculator –

1. Rs 5,000 monthly SIP – expected 12% return, period 5 Yrs – Corpus would be Rs 4.12 Lakhs
2. Rs 5,000 monthly SIP – expected 12% return, period 10 Yrs – Corpus would be Rs 11.62 Lakhs
3. Rs 5,000 monthly SIP – expected 12% returns, period 15 Yrs – Corpus would be Rs 25.23 Lakhs
4. Rs 5,000 monthly SIP – expected 12% returns, period 20 Yrs – Corpus would be Rs 49.96 Lakhs
5. Rs 5,000 monthly SIP – expected 12% returns, period 25 Yrs – Corpus would be Rs 94.88 Lakhs

Based on the above assumptions, the investor can decide how long to continue the SIP.

Top-up SIP – Top-up SIP is also known as Step-up SIP. In a top-up SIP, the investor can choose to increase the SIP amount annually by a fixed amount or a fixed percentage. For example – the investor starts SIP of Rs 5,000 monthly for 20 years and opts for 10% top-up on Rs 5,000 SIP, annually. That means, after 12 months, the monthly SIP amount will be Rs 5,500 and Rs 6,000 after 24 month and Rs 6,500 after 36 months and so on.

Now let us see how we can calculate the returns of step-up SIP through a SIP calculator. Here we need to input the start SIP amount (in this case Rs 5,000), the period input will be 20 years, expected return (say 12%) and the annual top-up as 10%.

Once the investor inputs the above amount in mutual fund calculator, the accumulated corpus shows as Rs 1.16 Crores against an investment of Rs 23.40 Lakhs over 20 years. Just to check, how much extra return is generated due to the step-up amount, the investor can remove the 10% annual step-up from the SIP calculator, and the result will show Rs 49.96 as final corpus against total investment of Rs 12 Lakhs. Therefore, by investing Rs 11.40 Lakhs in addition through a step-up SIP, the investor could generate extra return of Rs 66.04 Lakhs! Step-up SIP is the most powerful way of investing in mutual fund SIPs.

Therefore, it is clear how mutual fund return calculator performs the complex financial calculation so easily and without any delay. This helps the investor plan the SIP investment well.