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What does an SIP Calculator mean?

  • Posted By SuperCA
  • On 20 May

What does an SIP Calculator mean?

SIP calculator also referred to as a Systematic Investment Plan Calculator is a technique that lets you gauge the amount of return that you will get on a Mutual Fund. Many novice investors end up believing that Mutual Funds and SIPs are the same. However, SIPs are more like tactics that help you to invest in Mutual Funds. This method of using SIPs to invest in Mutual Funds is quite a popular way of investing for millennials.

SIP calculator is a widely used tool that helps investors by estimating their return on the mutual fund investments. However, the estimation of the actual return depends on a variety of factors. The exit load and the expense ratio is not accounted in the SIP Calculator (If any). SIP Calculator is a tool that is available online and is used to calculate the amount of SIP based on a certain expected annual return for your monthly SIP investments. This way Sip calculator helps you relieve your worries about planning you financial goals and future plans while maintaining financial safety and security.


Understanding the working of an SIP calculator

An SIP calculator takes inputs of various values from the users. The values required to make use of an SIP calculator are:

  • The amount that you have invested
  • The frequency with which you have invested the amount
  • The Time period for which you have invested
  • The returns that are expected

The SIP calculator formula as devised on the basis of the formula used for compound interest. Compound Interest is the powering factor of Mutual Funds.  The formula for SIP calculator is shown below:

F= P [(1+i) ^ n-1]*(1+i)/i


F= the amount that you will receive upon maturity

P= amount that you have invested through SIPs

i= the compounded rate of return

n= the number of investments that you have made

We can understand this formula through the following example. If Raman invests Rs. 2,000 per month for a time period of 24 months and you expect a 12% annual rate of return. Then, you have:

i= r/100/12 or 0.01


F= 2000*[(1+0.01) ^ 24 -1] * (1+0.01)/0.01

F= Rs. 54,486

Therefore, the estimated return that you will receive will be Rs. 54,486 as calculated by the SIP Calculator.


How does the SIP calculator actually help you?

As per some of the mutual fund experts, SIPs are a profitable mode of investing your funds as compared to investing your money in lump-sum amounts. It helps you in establishing a financially disciplined attitude and also helps you in creating a habit of saving money that will be benefitting you in the future.

An SIP calculator can be easily used online and is a very advantageous tool, which calculates your estimated returns that you will end up with after maturity of your investment. Some of the benefits of the SIP calculators are listed below:

  • SIP Calculator helps you in determining the amount that you want to invest
  • Calculates the gross amount that you have invested
  • Avails you an estimation of your returns



Basic points to remember while using SIP

Some of the basic information that you need before utilizing SIP are:

  • There is no maximum limit to the amount that can be invested in an SIP. However, a lower-limit has been set for an SIP investment i.e. Rs. 500 per month.
  • There is maximum time limit for the investment of an SIP. You can invest for your favoured time period but the minimum time period is 3 years.
  • SIP and mutual funds are different from each other. SIPs are just a way of making an investment and are not some sort of scheme or Investment Avenue.
  • You can modify the amount of SIP anytime you want.
  • You are also allowed to renew you SIPs either automatically or manually.
  • You can also pause your SIPs whenever you want but only for a specific period of time.