Saturday , October 23 2021

How to calculate your mutual fund returns using SIP calculator?

Systematic investment plans, or SIPs, have become increasingly popular among investors today. Unlike a lumpsum investment, an SIP is an easy-going method to invest regularly in mutual funds. Although market conditions can impact mutual funds, regular SIPs helps pare losses over the long-term and result in wealth creation. When you invest a certain sum every month, your corpus eventually multiplies due to the benefit of compounding that systematic investment plans offer on mutual funds.

Many first-time investors often wonder how much they would be able to reap from their SIP investment. An excellent way to calculate the future value of your SIP investment is by using a mutual funds SIP calculator. It is a simple tool that allows you to get an estimate of the expected returns through your SIP.

Before you invest in mutual fund schemes through SIPs, let’s understand the function of an SIP calculator in detail:

An SIP return calculator is a simple tool that enables you to evaluate your estimated returns on mutual fund investments through SIPs. However, the actual returns offered by fund houses might vary depending on multiple factors including expense ratio, exit load, etc.

Typically, SIP calculators calculate the wealth gain based on the expected rate of returns from your mutual fund scheme. Let’s simplify it with the help of an example. For instance, let’s assume that you are investing Rs. 5,000 every month for 10 years. At an expected rate of return at 12%, you will receive Rs. 11.62 lac on maturity, i.e. Rs. 6 lac in principal and Rs 5.62 lac in capital gains. At 8%, the total corpus would be lower at Rs. 9.21 lac, with capital gains comprising Rs. 3.21 lac.

On the other hand, if you invest Rs. 5,000 monthly at 12% for 20 years, your capital gains would be
Rs. 38 lac on an investment of Rs. 12 lac. Even at 8%, you would accumulate Rs. 29.6 lac with a capital gain of Rs. 17.64 lac.

This goes to show that given time, the power of compounding works in favour of mutual fund investments and allows you to grow your wealth exponentially.

To use an SIP calculator, follow the steps given below:

Step 1: Enter the monthly investment amount

Step 2: Choose an investment period

Step 3: Enter the expected rate of returns on your investment

Another way to calculate the expected returns is by using an Excel sheet with the correct formula. For the calculation, you will require the given formula below:

Formula= FV (rate, nper, pmt, [pv], [type])

In the given formula,

Rate = Interest rate for each period

Nper = Total number of payment periods

Pmt = Payment per period

Pv = Present investment value

Type = Payment time

N.B.: Maintain consistency in the unit of time to ensure accurate calculations.

To conclude, SIP calculators allow you to predict the maturity amount of your mutual fund investments in a single click. Due to the availability of online SIP calculators, you no longer have to depend on agents or fund managers to receive an estimated amount. Do it yourself with the above-mentioned steps within seconds. You can even adjust your investment against inflation to know the actual increase in wealth. Happy investing!

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