Mutual funds make it significantly easier for investors to diversify their ownership across individual stocks or bonds. But not all investments perform equally well simultaneously. A SIP or Systematic Investment Plan, is arguably the smartest and the most convenient way of investing in mutual funds. It is a strategy to invest a certain amount of money at regular intervals for a particular amount of time. A useful tool – the SIP calculator, helps investors arrive at a rough estimate of the expected returns from their SIP investments.
A SIP calculator (sometimes called a mutual fund investment calculator or mutual fund return calculator) can help determine the returns you are going to generate over time. It’s an easy and instant calculation. All investors need to do is enter basic details about their investment – such as the quantum of the SIP, the time interval, the expected returns, and the calculator manages the rest.
A SIP Calculator is a tried-and-tested method of hassle free investment forecasting in mutual funds, often indicative of how returns can be consistently generated while reducing potential risk. Speaking of risk, here are four ways a SIP calculator can assist you in investing according to your risk portfolio:
#1 It Builds a Habit of Investing Regularly
If you don’t invest, you are missing out on opportunities to increase your financial worth. It ensures present and future long-term financial security. Based on your portfolio risk, you may want to consider being riskier at a younger age with your investments. Greater risk comes with a shot at greater returns. A mutual fund SIP calculator is instrumental in such scenarios – with its easy to use interface helping you finely calibrate your expected returns at different levels. It also allows you to witness how investing at an early stage with a small amount of money, can lead to surprisingly large returns over the long term. In other words, a SIP calculator promotes the idea of small savings and investments from an early stage.
#2 The Overall Risk is Always Low
In finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decision. The risk factor can differ depending on market situations. Market conditions can often be unpredictable, but they do tend closer to a somewhat consistent average over the long term. A SIP Calculator cannot indicate market volatility, but it does allow investors to gauge what consistent returns over the long term would look like. Put simply – while a SIP Calculator does not guarantee a certain fixed value of returns year after year, it is a useful tool in gaining a longer term perspective on your investments. This proves useful to many risk averse or uninformed investors, who are then able to gain superior insights into the future of their investments.
#3 You Don’t Need An Expert Analyst If You Use A SIP Calculator
If you’re risk averse, you may feel the need for relying on an investment advisor or market research analyst for your investment. But with a SIP calculator, it’s easy to see that ups and downs of the market don’t affect your returns. Your cost of purchase is averaged, while the returns are transparently visible. You can skip having to bring in an expert to time the market or work out how your SIP would be impacted due to volatility. if you’re relying on a SIP calculator, you don’t need to have an expert understanding of the market or the strategy that goes into switching between various funds.
Rupee Cost Averaging
Rupee Cost Averaging refers to an investment approach in which you lower your average cost price over time. It is inherent to the nature of SIPs – since you’re investing at regular intervals, therefore ensuring that you buy more units when prices are low and less when they are high. With rupee cost averaging, you can take advantage of the market highs and lows for your benefit. The result? You avoid the complex or even impossible task of ascertaining the exact best time to invest. A SIP calculator will leverage the benefits of rupee cost averaging in the long-term to ensure that your average cost per unit represents cycles of the market and averages out to an overall advantage.
Power of Compounding
A Systematic Investment Plan is a powerful tool to fight market volatility and benefit from the enormous potential of compounding over time. It allows you to invest in any mutual fund by making small periodic investments, instead of a lump-sum one time investment. The advantage is that small amounts channeled at regular intervals does not significantly impact other financial commitments you may have. With the power of compounding, you can stay invested in a plan and earn solid returns in the long run.
A SIP Calculator is a fairly simple to use, quick tool to derive estimated returns. No surprises then, that investors rely on it overwhelmingly to meet their financial goals in the long run. Invest in a SIP and accomplish your financial goals keeping your risk portfolio in mind.