SIP Calculator

SIP Calculator is an online tool that estimates the returns on your investments. By entering details like the SIP amount, period of investment and expected rate of return, you can see how your mutual fund investments may grow over time. Using this calculator not only helps you plan your investments better but also compare different scenarios and assess whether your current mutual fund SIP contributions will help you achieve your financial goals.

Systematic Investment Plan (SIP) is a method of investment, wherein a fixed amount is automatically deducted at regular intervals from the investor’s linked bank account and invested in the mutual fund scheme of the investor’s choice. The duration of investment can be daily, monthly or yearly. 

As opposed to lump sum investing (a one-time investment), SIP promotes disciplined savings among investors and leverages rupee-cost averaging to manage market volatility. The regular investments ensure the

Following are the benefits of using Paisabazaar’s Online SIP Calculator:

• Helps in Goal-based investment planning: The calculator allows investors to estimate investment returns based on their mutual fund SIPs. The calculator also helps them determine the monthly investment or SIP required to reach a target corpus within a specified timeframe.
  
• Supports different investment approaches: The SIP return calculator allows investors to estimate returns on their monthly SIPs, yearly SIPs and lump sum (one-time) investments. This helps investors compare different investment methods and choose the one that best fits their cash flow and financial goals.
  

• Factors in step-up SIP investments: Step-up SIP calculation is another feature that allows investors to incorporate an annual increase in their SIP amount. This helps align investments with future salary increments and can significantly increase the final corpus without requiring a large initial investment.
• Helps in comparing different investment parameters: By changing the values of the variables given in the return calculator such as the SIP amount, investment tenure and expected returns, investors can identify a strategy that best suits their financial goals and budget.
• Shows a clear break-down of investments and its returns: The MF SIP calculator displays the total invested amount and estimated returns separately. This helps investors understand how much of the final amount comes from their own contributions and how much comes from the investment growth.
  

• Helps in making better investment decisions: The calculator provides an estimated view of future outcomes before investors commit their money. This helps them make more informed investment decisions and set realistic expectations regarding wealth creation.
  
• Saves time and gives accurate results: Instead of calculating the results using complex mathematical formulas, investors can instantly calculate the expected returns and required SIP amounts accurately using the SIP return calculator. This not only eliminates any scope for human error but also makes investment planning simpler, faster and more accessible.
  

Disciplined Investing

Starting an SIP early encourages disciplined investment as you set aside a fixed portion of your income every month/quarter/half-yearly/annually for future savings. This leads to long-term wealth creation as the return on your investment starts earning more returns over time due to the power of compounding.

Rupee Cost Averaging

Investing early through a systematic investment plan every month helps you to average out the cost of investment. It reduces the risk of market timing as you buy more units when the market is low and fewer units when the market is high. This reduces the impact of market fluctuations over time and potentially lowers average purchase costs.

Power of Compounding

Opting for Systematic Investment Plan ensures that you regularly contribute a fixed amount in a mutual fund scheme for a specified time frame. Each SIP amount adds to your total investment amount. Compounding happens when you stay invested and the return on your investment starts earning more returns over time, thereby, helping your invested sum to grow faster.

Let’s take an example:-

Suppose you have started investing Rs 5,000 in mutual funds via monthly SIP method at the age of 22. On the other hand, your friend Mohit has started investing Rs 5,000 in mutual funds through SIP at the age of 28. Assuming the annual rate of return to be 12%. At the age of 50, the final corpus would be:

To summarise, if you want to make the most of your investments, start SIP early.

With a monthly SIP investment of Rs 5,000 @ 12% p.a. returns, you can accumulate Rs 2.18 lakh in 3 years, Rs 4.12 lakh in 5 years and Rs 11.62 lakh in 10 years, stating the power of long-term compounding.

• You can compare different scenarios by adjusting the rate of returns, monthly contributions and tenure to identify the best-suited plan.
• Helps you align monthly contributions with future financial goals.
• You can quickly calculate your expected returns on your SIPs and save time.
• Gives you an idea of how early SIP investments grow to generate wealth through compounding.

The Paisabazaar's SIP Investment Calculator ask you to enter the following three inputs:–

• Monthly SIP - The amount you wish to invest every month.
• Expected rate of return (p.a.) - The interest rate you expect on your SIPs during the tenure.
• Investment Duration/Tenure - The number of years for which your investment will stay invested with Mutual Fund AMCs.

Our Mutual Fund SIP Calculator displays the following output:–

• Total Invested Amount - The data lets you know how much money you have invested during the tenure.
• Estimated Returns - The data shows the approximate returns on account of invested money.
• Total Value of Investment - It includes the SIP invested and estimated returns on your investment.

The corpus required for emergency purposes should be the first savings an investor should consider before starting investing in an SIP.

Check out our Daily SIP Calculator

Financial Goals

The first step in SIP planning is to identify your financial goals. Whether you start SIP for your child's education, your retirement or dream travel. Once a goal is defined, you can easily estimate how much investment is required and in what timeframe.

Based on Income - The 50-30-20 Rule

One of the effective ways to invest in a mutual fund SIP is the 50/30/20 rule. The rule allocates 50% of post-tax income to unavoidable monthly expenses, 30% to lifestyle expenses such as entertainment and 20% to savings or investments. Within the 20% portion of your income, you can aim to invest in mutual funds.

Let's take an example for SIP investment stratergy—

If your monthly take-home salary is Rs 60,000, the allocation would look like this:

Monthly expenses (50%): Rs 30,000 for rent, food and bills.

Lifestyle (30%): Rs 18,000 for travel and shopping.

Savings/SIP (20%): Rs 12,000 for emergency corpus and investments. You can set up an automatic SIP of Rs 5,000 for a disciplined, "savings-first" approach as a beginner. You can step-up your SIP once your salary increases.

There are three primary methods to calculate returns on your mutual fund SIPs, absolute return, CAGR and XIRR. Let’s briefly know about each one along with their formulas:

• Absolute Return is the gain or loss experienced by a mutual fund scheme or portfolio during a specific time period, which is usually less than 1 year. It is expressed in percentage and unlike relative return, it is calculated based on the fund’s own performance, independent of any comparison to and does not compare it to other indices or standards.
  
  Formula for Calculating Absolute Return = [(Ending Value - Initial Value)/ Initial Value]*100
• CAGR (Compound Annual Growth Rate) measures the annual rate of return of a mutual fund scheme over a specified period of more than a year. It represents how an investment grows from its starting value to its ending value over time, assuming the gains were reinvested at the end of each year. This method of return calculation can be useful in comparing the performance of different stocks or uncorrelated investments.

Formula for Calculating CAGR = CAGR=(( BV/EV )1/n −1)×100

where:

EV=Ending value

BV=Beginning value

n=Number of years

XIRR (Extended Internal Rate of Return) measures returns when money is invested at various points rather than all at a point in time.

Formula to calculate SIP maturity amount: FV = P [ (1+i)^n-1 ] * (1+i)/i 

where:

FV = Future Value

i = Rate of return

P = Investment amount

n = Number of installments

The value of ‘i’ is calculated as {(1 + Annual Return)^1/12} – 1

Let's take an example

For instance, Aashvi invested Rs 10,000 monthly in an SIP for 10 years. The expected annual rate of return is 12% p.a.

SIP calculators provide projected or estimated returns based on a fixed rate of return. It does not consider the exit load and expense ratio. Also, the calculator does not factor in inflation, capital gain taxes and market fluctuations, which can reduce the net returns.

In this, the actual market performance is not included. Systematic Investment Planning includes multiple investments at different time frames and therefore, XIRR, i.e., Extended Internal Rate of Return, is used to calculate actual SIP returns based on real cash flows (inflow/outflow). XIRR provides a "money-weighted" return, considering that the first SIP was invested for 12 months, the second investment for 11 and so on.

• Exit load, expense ratio, brokerage or platform fees, and transaction charges can reduce SIP returns.
• Holding your mutual fund investments for a longer period maximises your returns due to the power of compounding.
• Prolonged bear markets can reduce the returns on your mutual fund investment.
• .High inflation and long-term capital gain taxation can reduce the net profits on your investments.
• Pausing or stopping your SIPs can also affect your long-term gains.