Did you know that nearly ₹8,500 crores are invested in mutual funds every month through SIPs? Needless to say, SIP is a buzzword among investors. So what exactly is a SIP? A SIP or Systematic Investment Plan is the smartest way in which you can invest a fixed amount in a mutual fund.
The flexibility of SIPs is that you can invest in mutual funds at regular intervals, such as weekly, monthly, quarterly, etc. SIPs help you achieve your financial goals by leveraging rupee cost averaging and are fueled by the power of compounding.
Here we’ll learn about how you can calculate SIP returns using an online tool- SIP return calculator and also study the top-performing SIPs for a 5-year investment plan.
What Is An SIP Return Calculator?
A Systematic Investment Plan Return Calculator, simply known as the SIP Calculator is an important tool that gives you a possible analysis of your Systematic Investment Plan (SIP). If you want to fulfill your financial goals, the SIP Calculator can help you determine:
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- How much will a particular SIP amount grow to over a fixed period of time at an assumed return rate?
- How much do you need to save a month and at what returns for how much period to reach a target sum?
What Does A SIP Return Calculator Do?
Here’s how a SIP return calculator will help you analyze your investment:
- You can determine the amount you should invest in a SIP to reach a target corpus after a certain period of time.
- You can determine the target amount of growth in your existing SIP based on your assumptions.
- Your corpus can be broken down into your contribution and investment returns and will thus give you an idea of the wealth ratio.
How Does A SIP Calculator Work?
The returns that you earn in SIP are compounded. Using a SIP calculator, you can easily calculate the expected target that your SIP would grow into and you can also calculate the standard monthly contribution needed to achieve your desired financial goal.
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Table of Contents
Calculate The Expected SIP Target
Enter the following details:
- The investment amount
- The expected rate of return or compound annual growth rate (CAGR)
- Step up (if any)
- Tenure
- Date of SIP
Calculate The Standard Monthly Contribution
Enter the following details:
- Final target amount
- Expected rate of return or compound annual growth rate (CAGR)
- Step up (if any)
- Tenure
- Date of SIP
Top Performing SIP Investments For 5 Years
If you want to invest in the short-term, debt mutual funds are the best. Short-term investment ranges from 1 to 5 years. On the basis of fund performance, the best SIPs for a period of 5 years are stated below:
- Kotak Savings Fund (G)
- SBI Magnum Ultra Short Duration Fund
- SBI Magnum Ultra Short Duration Fund Of Income Dist Cum Wdrl (RIDCW-W)
- SBI Magnum Ultra Short Duration Fund of Income Dist cum cap Wdrl (Dividend Payout – Weekly)
- Kotak Savings Fund of Income Dis cum Cap Wdrl (RIDCW-D)
- Kotak Savings Fund of Income Dis cum Cap Wdrl (PIDCW-M)
- Kotak Savings Fund of Income Dis cum Cap Wdrl (Dividend Payout – Weekly)
- L&T Ultra Short Term Fund
The Bottom Line
According to wealth planners and finance experts, investing in mutual funds through Systematic Investment Plans is an excellent way to become financially disciplined and get into the habit of saving.
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In this process, the Systematic Investment Plan Calculator (or, SIP return calculator) is an important tool that helps you determine the amount you can gain at the end of your SIP tenure. All this being said, it is also to be kept in mind that mutual fund investments are subject to market risks. This is because the value of assets can either increase or decrease in the future.
FAQs
1. How is SIP return calculated?
SIPs help you achieve your financial goals by leveraging rupee cost averaging and are fueled by the power of compounding. The compounded interest boosts the mutual fund returns. If you want to take the easier and more convenient road, you can use the SIP return calculator to determine the amount you should invest in a SIP to reach a target corpus after a certain period of time.
2. What is the average return on SIP?
SIP returns vary from fund to fund. Generally, a return of 12-18% can be expected for large-cap equities, and the expected rate from mid-cap equities is around 14-17%. On the other hand, one can expect a return of 6 – 9 % p.a. for a long-term debt-based mutual fund,
3. What is the maximum tenure of a SIP?
There is no maximum tenure of SIP. You can keep it going till your desired corpus is achieved.