## SIP Calculator: Plan and calculate the future value of your SIP investments

### About SIP

A Systematic Investment Plan (SIP) is an investment vehicle which allows the investor to invest a fixed sum of money in a mutual fund scheme at regular intervals. The frequency of SIP investment can be weekly, monthly, quarterly or yearly. The disciplined investment option is gaining popularity amongst Indian investors as it gives the benefit of Rupee cost averaging, i.e. it averages out the increase/decrease in the Net Asset Value (NAV). Thereby, an investor can actually invest in a systematic manner without worrying about market volatility and timing the market.

**SIP calculator**

A SIP calculator is basically an investment tool which helps investors to calculate the returns generated on their mutual fund investments made through a SIP route. While it gives an estimate about the expected returns, the actual returns delivered by a mutual fund scheme depends on so many factors. Also, the returns calculated from this SIP calculator are indicative and rely upon the projected annual return rate. This projected rate, inturn, depends on the historical performance of a mutual fund. So, in a way, SIP calculator computes the future value of a SIP investment using the past years’ showing of a mutual fund scheme.

As stated above, the objective of the investor should be to use this SIP calculator in such a way that the expected returns will be as close as to the actual returns. For this, he/she needs to take due diligence for ascertaining the projected rate of return.

*Following points should be kept in mind while choosing this projected rate:*

- An investor can take the category return for a defined time duration; if he/she has finalized the category of a mutual fund scheme where he wants to invest.
- An investor can opt for the SIP return of the specific scheme if he/she has some specific scheme in his mind & wants to check its performance for a stipulated time period.
- The rate should align the investment objective of a scheme with the financial objective of the investor.

Please keep in mind the SIP returns of a mutual fund scheme are not fixed unlike a fixed or a recurring deposit. These are market linked and therefore fluctuate as per market movements which may impact the estimated returns.

**Benefits of the SIP calculator**

The SIP calculator is a beneficial & exploratory tool which could benefit an investor in the following ways:

**Time-saving tool:**The SIP calculator is quite handy, easy to use & navigate. An investor gets the desired result almost instantly and thus saves his time from knowing & doing those complex calculations on his own.**Determines the target amount:**The research-oriented & time-tested SIP calculator computes the target amount based on the series of SIP investments, frequency & duration of these investments and the percentage of expected returns.**Goal planning tool:**The SIP calculator is a great way to plan for your various life goals too. For e.g. if you plan to buy a car after 3 years then the tool can tell you the monthly SIP which you need to make to accomplish this goal. It may involve a bit of hit & trial method but if you have zeroed in on the car you may want to purchase or have set aside a target budget for it then you can calculate the SIP series based on the expected return out of these investments.**Helps in Decision making:**This simple yet effective tool converts a confused & an unsure investor into an aware & an informed one. It helps him in making the right investment decisions & channelize his savings in a wise manner.

**Who can use a SIP calculator?**

Any individual who is planning to invest in mutual funds through SIP can use this calculator to determine the future value of his/her investments. Even if you are already investing in mutual funds through SIPs, you can use the calculator to determine the future value of your on-going investments.

**Steps involved to use a SIP calculator**

To use this SIP calculator, you are required to provide the following details: a) How much money do you want to invest, i.e., monthly investment amount b) Duration of investment, i.e., how long you will be investing c) Frequency of investment, i.e., weekly, monthly, quarterly or yearly d) Percentage of expected returns, i.e., how much returns do you expect from your investments.

**Calculation of SIP returns**

The SIP calculator uses the power of compounding principle to calculate the future amount of your SIP investments. The longer you stay invested, the longer you gain.

To understand this, let us take an example. A monthly investment of Rs 5,000 for 10 years at an expected rate of return of 12 per cent will earn you Rs 11.61 lakh. The gains made by you in this scenario will be approximately Rs 5.61 lakh (Rs 11.61 lakh minus 5000*10*12).

Similarly, if you stay invested in the scheme for 15 years, the future amount of your investment will be Rs 25.22 lakh, vis-a-vis an invested amount of Rs 9 lakh (i.e. 5000*15*12). By investing for five years more, the gains from your investment have almost doubled.

**What does the SIP calculator show?**

Based on the information provided by you, the calculator calculates the amount you will get from your SIP investments. If you have linked the investment to your future goals such as retirement, child's education or buying a house, then the future amount can suggest whether you need to make additional savings, if any, to fulfill the goal.

**What does the SIP calculator don't show?**

SIP calculator doesn’t provide information regarding the taxes which an investor needs to pay on the total capital gain of his investment. For this, he/she needs to check the tax treatment of the broad categories of a mutual fund scheme - equity, debt, hybrid & others. SIP calculator, also, doesn’t show the costs associated with a mutual fund investment. This cost is primarily attributed to the total expense ratio of a scheme and the exit load which one may need to pay for exiting a scheme. Please visit our various Mutual Fund Scheme pages for the complete information around a scheme, including the tax implications, expense ratio, exit load & others. Some popular scheme pages for your reference:

- Axis Bluechip Fund
- HDFC Balanced Advantage Fund
- Mirae Asset Emerging Bluechip Fund
- SBI Small Cap Fund
- Parag Parikh Flexi Cap Fund
- Axis Long Term Equity Fund

## Frequently Asked Questions (FAQs):

The different types of SIP available are as follows:

**Regular SIP:**This is the conventional method of Systematic Investment where the investor can invest a fixed sum of money in a mutual fund scheme at regular intervals. The frequency of SIP (Systematic Investment Plan) can be weekly, monthly, bi-monthly, quarterly, half-yearly or yearly.**Step-up or Top-up SIP:**A Step-up SIP enables an investor to increase the SIP amount by a particular percentage or amount from a specified time period. For e.g. A Step-up SIP of 10% on a yearly basis would mean that the SIP amount will increase annually by 10% of the amount of the previous year. So, a Rs. 5,000 monthly SIP beginning from this year will increase to Rs. 5,500 monthly SIP automatically from next year.**Perpetual SIP:**A Perpetual SIP essentially means which continues to remain in force until any specific instruction to stop it or which does not have any end date specified by an investor.**Flexible SIP:**A Flexible SIP lets an investor enjoy the flexibility of altering the investment amount as per his preference. One needs to inform the fund house at least a week before the SIP installment date for changing the investment amount.**Trigger SIP:**This is a modern day SIP facility which allows an investor to redeem his investments partly or fully or switch his investments to another scheme automatically upon reaching a pre-defined trigger point. These trigger points are related to a certain event or occurrence. Such triggers can be set for upside/downside NAV, index level, date or capital. The objective is to curtail losses by eliminating market risks.**Multi SIP:**A Multi SIP powers an investor to invest in multiple schemes of the same fund house through a single instrument.**SIP Insure:**Several mutual fund houses have started bundling a group term life cover at no extra cost with the amount of SIP made by the investors. The insurance coverage continues to remain in force as long as the investor stays invested in the scheme. The amount of insurance cover may range from 20 to 120 times of the monthly SIP and generally increases gradually with time.

- How much money do you want to invest, i.e., monthly investment amount
- Duration of investment, i.e., how long you will be investing
- Frequency of investment, i.e., weekly, monthly, quarterly or yearly
- Percentage of expected returns, i.e., how much returns do you expect from your investments

- An investor could opt for Step-Up SIP facility at the time of starting his SIP investments, This will enable the investor to increase his SIP periodically by a specified amount or percentage.
- The investors could increase their Regular SIPs too. However, not all the fund houses give the feature of increasing regular SIP through online mode. In offline mode, the investors may be allowed to increase or decrease their SIPs anytime. But in online mode, they may be required to register fresh SIPs for a scheme for the increased amount.