Everybody likes to plan their finances for their future, but most do not know where to start. For people who have less knowledge about investments but want to invest, the Systematic Invest Plan is the best approach to building long-term wealth.

Systematic Investment Plan, also known as SIP, is an investment method in mutual funds where the investor contributes a fixed amount at regular intervals which can be daily, weekly, fortnightly, monthly, quarterly, half-yearly, and yearly. The other method being lumpsum investments in mutual funds.

If you are planning to invest for the long-term, it is always a good idea to make a rough calculation on the future value of your investments. This is where a SIP calculator comes into the picture and it is very useful to all mutual funds investors investing via SIP method.

What is a SIP calculator?

A SIP calculator is a simple yet powerful financial calculator that helps investors to plan and calculate the future value of their investments. Using this calculator, you can easily calculate how much you must invest to achieve your financial goals or long-term objectives in case you are planning your retirement or to buy a house in the future, etc.

Though there are many SIP calculators available including at Aetram Trades for calculating the future value of your investments, it is better to know the formula for calculating the SIP. The formula is FV = P ( ((1+i)^n)-1 ) * (1+i)/i where FV is the future value, P is the periodic investment, i is the expected return and n is the number of years.

As an investor, you must know that there are different types of calculators when it comes to mutual fund investing. There is Simple SIP calculator, Step-up SIP calculator, Goal SIP calculator, Smart Goal calculator, Lumpsum Investment calculator, retirement Planning calculator and Systematic Withdrawal Plan calculator. These calculators can be accessed from the mutual funds sahi hai website.

Even the market regulator Securities Exchange Board of India (SEBI) has a dedicated page for different kinds of financial calculators including mutual fund calculators. You can check these calculators by clicking the link and start planning your SIPs and future so that your future is financially secure.

Magic of Compounding

SIP-based investing has become popular among investors because it is simple, cost-effective, it can be started with a small amount as low as Rs 100 per month, and most importantly your investment will benefit from the power of compounding.

Compounding of money is a mechanism where your initial investments give you interest and that interest starts giving you additional interest. In other words, compounding of money happens when your principal amount gives you interest and over time you start getting interest on interest. In the long-term, this results in exponential growth of your investments. The only thing you must keep in mind for the compounding to work is to stay disciplined and invested for a very long time without failing to contribute to your SIPs.

Benefits of SIP calculator

The SIP calculator saves a lot of time as it can calculate complex formulas in a few seconds and gives us the result so that we do not have to calculate manually.

The calculator can be used to simulate and project the future value of your investments. This helps you to visualize the amount of money needed to invest and the corpus you will accumulate in the future.

Most calculators come with a pie chart, bar chart or line chart which clearly shows how the power of compounding works. This helps you to clearly foresee how small, regular and disciplined investing over a long period of time can play an important role in wealth creation and encourages investors to start a SIP.

Using the calculator, you can easily experiment with different scenarios. You can tweak the investment amount, duration, investment interval, and interest rate to see how it affects your final corpus.

With the help of the calculator, you can always work backwards to see how much you should invest to reach a specific financial goal. You can give inputs like the future value, time period, interest rate, etc. and get to know the amount you have to invest monthly or quarterly, etc.

Conclusion

SIP calculators are not just some financial tools. It is your guide to financially securing your future whether it is planning your retirement, your kids education or building your dream home, etc. Every serious investor must know how to use these tools and they should also know where to access the right tools. SIP calculators have made investing simple and straightforward and it also helps investors to manage risk. So it would be prudent to start your SIP as soon as possible right here at Aetram Trades.

Frequently Asked Questions

1. I want to start a SIP. What is the amount I can start with?

You can start a SIP with a mutual funds scheme with a minimum amount of Rs 100. There are more than 2000 mutual funds schemes across various Asset Management Companies (AMC). However, this amount can vary based on the mutual fund scheme provided by the AMCs and the installment tenure.

2. Can I stop a SIP?

Yes. If you wish to stop SIP you can stop by sending a request before the due date of the next instalment.

3. Can you modify your SIP?

Yes. You have the option to modify your SIP. In the scheme, you can modify the SIP installment amount, SIP date, and frequency.

4. In what schemes can I start a SIP?

You can start a SIP across various mutual funds schemes like equity, debt, hybrid schemes, and index funds.

5. What is a step-up SIP?

When it comes to step-up SIP, you can increase SIP investment amount after specific intervals. For example, if you start a SIP this year and get a salary increment next year, you can also step-up or increase your SIP the next year. By increasing your SIP investment amount every year and the impact of compounding, your final corpus will increase drastically.