A Systematic Investment Plan (SIP) is a specific category of investment plan offered by mutual fund providers. Through the use of a SIP, one can invest a small amount into a chosen mutual fund on a regular basis. SIP offers ordinary investors a passive, disciplined investing method that can use compounding to generate wealth over the long run. A mutual fund SIP return calculator is designed to give potential investors an approximate figure for their mutual fund investments. However, there are a number of different factors that might affect the actual returns offered by a mutual fund plan. The SIP calculator does not explain the exit load or expenditure ratio. 

Mutual funds are becoming more and more popular for their high returns. You may calculate the yearly return with the help of a SIP calculator. A SIP return calculator determines the wealth growth and expected returns for your monthly SIP contribution. You may actually get a decent estimate of the maturity amount for each of your monthly SIPs based on a projected yearly return rate.

What is A SIP Return Calculator?

You may calculate the SIP Investments by including the following parameters:

• The monthly investment amount
• Investment timeframe
• Anticipated yearly returns

Fund companies typically require investors to commit to the SIP for at least six months.

How can a SIP return calculator help you?

To determine the anticipated returns and increase in wealth for your monthly SIP investment, use the SIP return calculator. You may get an approximate value for the maturity amount of any monthly SIP based on the anticipated yearly return rate.

According to some mutual fund experts, SIP investing can produce higher returns than lump-sum investments. SIP investments might assist you in developing financial discipline and the habit of saving money for the future.

The advantages of utilizing a mutual fund SIP calculator are as follows:

• SIP calculators are easy to use and navigate. One must enter the required data to estimate their returns. The calculator also saves investors’ time by doing the laborious maths. The calculator instantly estimates both the maturity amount and the monthly investment amount.
• The SIP calculator allows investors to predict their potential returns at the conclusion of the investing period. Calculating the monthly investment amount is made more accessible by knowing the investor’s anticipated profit at the end of the investment period.
• The calculator offers graphical and tabular representations of the return estimates. Investors can easily comprehend the returns and make justifiable decisions as a result.
• Other calculators only display the minimal monthly payment or the predicted future value of your investments. However financial institutions provide you with a list of funds to help you reach your financial goals. HDFC small cap fund direct growth, HDFC Hybrid Equity Fund, etc., are some of the best funds in this list. 

How do SIP calculators work?

Understanding how these numbers are calculated is good, even though you can always find a SIP calculator online. So you can feel more confident in your investing approach.

SIP calculators employ the mathematical formula of compound interest to determine investment returns. The calculator analyses the returns while considering the frequency of compounding. Additionally, the SIP calculator requests that users enter the investment period, expected return rate, and desired monthly contribution amount.

Read also: Why Online Trading is the Future of Financial Independence

Principal Amount x {[(1+ r)^n – 1] / r } x (1+r) = Maturity amount

The number of payments you make in this case is n. The anticipated rate of return is r.

Consider a situation where you want to invest Rs. 1,000 per month for two years at a 12% interest rate.

This means that the monthly rate of return is 12%/12 = 1% = 0.01

You may determine the maturity value in your circumstance using the aforementioned formula.

The maturity value is equal to 1,000X ({[1 +0.01] ^ {24} – 1} / 0.01) x (1 + 0.01) = Rs. 27,243