What is SIP and SIP Calculator?
A Systematic Investment Plan (SIP) refers to a systematic mode of investment made periodically. It lets you invest in a mutual fund scheme of your choice at regular intervals and earn potentially high returns in the long term. Through a SIP mode you can start an investment with an amount as low as Rs. 500 on a monthly, quarterly, semi-annual or annual basis in a mutual fund scheme; there is no maximum limit on how much one can invest.
Benefits of SIP
Investment in mutual funds via the SIP route is a popular choice among investors due to the following advantages:
- A Small amount is light on pocket: Individual SIP installments can be made with an amount as low as Rs. 500 which could ease the financial burden on investors.
- Flexibility: An investor can increase or decrease the amount of periodic installment according to his financial needs and conditions. Flexibility of SIPs makes it favourite among investors.
- Power of Compounding: Systematic Investment Plans provide investors with the benefit of the power of compounding. A SIP enables investors to earn returns not only on their principal investment but on earned returns as well, thus, providing the power of compounding.
- Less Risk: SIPs are usually linked to equities and although SIPs carry price risk of negative returns, it is lower in terms of other investments. The nature of systematic investments (as they are done repeatedly) and that it is meant for the long term translate to lower risk. Moreover, one can stop SIP any moment before undergoing further losses due to market movements as well.
- Rupee-cost averaging: The SIP mode enables an investor to buy more units periodically. The mutual fund manager thereby purchases more units when prices are low balancing it against when prices are sky-high. This is called rupee-cost averaging.
A SIP Calculator is a tool which helps you calculate your estimated earnings at the end of a specific tenure. You will also put in the amount and the investment frequency, which is usually per monthly. Alternatively, it also enables you to calculate how large the amount of your periodic investment should be so that you can achieve your financial goal such as a corpus for retirement or an emergency fund for unexpected medical expenses in due time.
How to Use SIP Calculator?
You can calculate your SIP returns i.e either the SIP target corpus or your SIP monthly investment amount using the Paisabazaar SIP Calculator by following the steps below:
Step 1. Type in the SIP duration i.e the time period for which you intend to invest in a mutual fund scheme. The SIP duration can range from a few months to a few years.
Step 2. Estimate the rate of return on your investment. You can determine this by checking the performance track record of the mutual fund scheme in which you intend to invest. You can get the details regarding the returns of a mutual fund scheme either from its factsheet present on its fund house’s website or from Paisabazaar.com.
Step 3. The third variable that is required while using the Paisabazaar SIP calculator is either the monthly SIP amount that you plan to invest in a mutual fund scheme of your choice or the target corpus. If you fill in the amount of monthly investment you are ready to make, then estimated returns at maturity time are provided. If you are using the calculator to estimate how much money you need to invest in a mutual fund scheme in order to get a specific amount at the end of your SIP tenure, then enter the target amount and calculator shall provide the information of required monthly investment.
As the tool is free to use, investors can easily change any of the variables to estimate the different returns that they could receive in lieu of their investment. Currently, these calculators do not take into account either the capital gains tax you may incur or the probable inflation.
What is SIP Advanced Calculator?
It is an advanced version of SIP Calculator that helps calculate the returns of SIP by factoring in inflation over time. It gives a more realistic picture of inflation adjusted investment and profits. One needs to enter periodic investment amount, tenure, rate of interest and expected rate of inflation. The SIP advanced calculator predicts returns that will be generated before and after inflation.
What is SIP Need Calculator?
As mentioned earlier, that a SIP calculator can help us determine the amount of monthly investment so as to accumulate a targeted amount of money. In SIP Need Calculator, you need to fill in the details as the desired amount or target corpus, number of years in hand and expected rate of return so as to get an estimate of investment you need to make monthly.
Why Should you Invest In SIP?
One should start investing in SIP because apart from inculcating a regular habit of investing, it helps accrue more wealth in the long run with little periodic investments. As one can start investing in SIP with amount as low as 500, the total amount will generate higher returns over the years.
Is SIP Safer than Lumpsum Investment?
Any investment depends on various factors like financial goals, risk factors, returns, etc. However, SIP is ideal for those who cannot invest a large amount of money at once but aim to accumulate some in specific duration of time. One doesn’t need to keep a watch at the market if it is high or it will crash for a suitable time to invest when investing through SIP. Some parts of SIP will face the market volatility but people who prefer less risk will willingly opt for SIP.
What are the Best Funds to Invest in SIP?
There are various SIPs by innumerable Asset Management Companies (AMCs) and one can choose among them for investment on the basis of AMC ranking, tax saver SIP i.e. ELSS (Equity Linked Saving Scheme), Net Asset Value (NAV) of the funds,etc.
Here is a List of Top Performing Mutual Funds to Invest in SIP
|Scheme Name||1 Year Return||3 Year Returns||5 Year Returns|
|ICICI Prudential Bluechip Fund||9.80%||12.43%||9.75%|
|DSP Tax Saver||16.55%||13.53%||11.83%|
|Franklin India Equity Fund||5.95%||9.67%||8.76%|
|ICICI Prudential Value Discovery Fund||0.15%||7.06%||7.28%|
|Axis Long Term Equity Fund||17.62%||17.74%||12.72%|
|Nippon India Tax Saver (ELSS) Fund||3.67%||4.01%||5.16%|
|DSP Equity Opportunities Fund||15.24%||12.88%||11.07%|
|Motilal Oswal Long Term Equity Fund||15.90%||15.63%||–|
|Aditya Birla Sun Life Pure Value Fund||-8.59%||3.52%||6.14%|
|HDFC Equity Fund||9.61%||12.47%||8.07%|
|Axis Bluechip Fund||23.29%||20.91%||11.66%|
|Mirae Asset Large Cap Fund||16.30%||16.80%||12.74%|
|Invesco India Growth Opportunities Fund Direct Growth||15.34%||17.40%||12.37%|
|Canara Robeco Bluechip Equity Fund Direct Growth||19.06%||16.84%||10.56%|
|DSP Equity Direct Plan Growth||20.93%||14.65%||10.47%|
|Kotak Equity Opportunities Fund Direct Growth||17.35%||13.63%||11.56%|
|Aditya Birla Sun Life Equity Fund Direct Growth||11.53%||12.28%||11.93%|
|SBI Magnum Multicap Fund Direct Growth||15.79%||13.79%||12.32%|
|L and T India Large Cap Fund Direct Growth||15.71%||13.22%||8.47%|
Why Should You Choose Paisabazaar for Your SIP Investment?
Paisabazaar is your one-stop platform for all types of mutual funds. We have tie ups with major fund houses operating in India and our services are provided to you free of any cost. Additionally, you can benefit from the recommendations of our in-house investment advisors who help you make investments that give you best returns as per your investment time horizon and risk appetite.
Our online investment platform allows you to easily compare and choose the mutual fund schemes which best suit your specific requirements using a SIP. The Paisabazaar SIP Calculator helps you easily and quickly calculate your SIP returns as well as determine how much money you need to invest on a periodic basis in order to achieve a targeted corpus after a predetermined period of time.
Frequently Asked Questions
Q. Is SIP a Mutual Fund?
A. No, SIP or Systematic Investment Plan is a mode of investing in mutual funds; it is a medium. Instead of donating a lump sum amount, you invest periodically in small amounts.
Q. Can I start SIP online?
A. Yes, one can start SIP online by choosing the fund and investing in it. One can go to Paisabazaar site or app, go to Direct Plans of Mutual Funds, scroll through various funds based on rating and fund houses and select the fund in which you want to invest. Keep in mind your risk appetite and investment horizon. You can do your KYC, link your bank account and set a date for automatic SIP deduction.
Q. How important it is to choose the right date for SIP?
A. It is important to choose the right date for SIP so that it is not missed out or there is sufficient balance at the time of SIP deduction in your bank account. It should be chosen near to the date of the credit of your salary.
Q. Does SIP mean investing only in equity funds?
A. As mentioned earlier, SIP is a mode of investment and not the fund itself. Hence you can purchase other fund categories such as Hybrid funds. However, it is typically associated with equity funds.
Q. SIP should be started when the markets are high and should be stopped when the markets fall. Is that true?
A. This is more applicable when investing in lump sum so that investor doesn’t suffer a loss. In case of SIP, markets will rise and fall over the time period therefore averaging the risks.
Q. What if I miss my SIP dates or don’t have sufficient money in my bank account?
A. In case you miss an installment, SIP is neither deactivated nor penalty charges are taken. However, if 3 installments are missed then SIP is liable for cancellation.
Q. Can I reduce my SIP amount?
A. While some mutual fund schemes like Flexi MF plans have provision of changing the installment amount monthly, in some plans one will have to write to close the current SIP, and restart a new amount. Once it is stopped, start a new SIP with new amount. However, this may not be applicable to ELSS.
Q. How do I cancel my SIP?
A. Login to your mutual fund account, ‘Cancel SIP’ and it will be cancelled within 30 days of request. Although some penalty might be charged for closing it before the maturity time.