What is a SIP Calculator?

A SIP calculator is a simple tool that allows individuals to get an idea of the returns on their mutual fund investments made through Systematic Investment Plans. SIP investments in mutual funds have become one of the most popular investment options for millennials lately.

These calculators are designed to give potential investors an estimate on their mutual fund investments. However, the actual returns offered by a mutual fund scheme varies depending on various factors.

How SIP Calculators Work

A SIP calculator uses the following formula to calculate returns:

Where:

• M is the amount you receive upon maturity
• P is the amount you invest at regular intervals
• n is the number of payments you have made
• i is the periodic rate of interest

For accurate calculations, the annual return rate is converted to a monthly rate using compounding principles, not simply divided by 12.

Benefits of SIP Investing

• Financial Discipline: Helps you develop regular saving habits
• Rupee Cost Averaging: Reduces impact of market volatility
• Power of Compounding: Your returns generate more returns over time
• Flexibility: Start with as low as ₹500 per month
• Long-term Wealth Creation: Ideal for achieving financial goals