SIP Calculator

What is a SIP Calculator?

A SIP Calculator is an online tool that estimates the potential future value of regular investments through a Systematic Investment Plan (SIP).
It uses the monthly investment, anticipated return and the  investment period to estimate potential profits and investment values.

A systematic investment plan or SIP is a process wherein an investor contributes small amounts of money to a mutual fund scheme regularly.
These regular intervals of contributions typically come in the form of monthly instalments.

For example, a ₹5,000 monthly investment in a mutual fund for 15 years will accumulate to ₹9,00,000. With profits earned on top of that, the
final value can be well above the ₹9,00,000 contribution mark.

The SIP Calculator estimates the potential future value of money based on the expected or assumed average returns.

However, it is important to note that mutual fund returns are not guaranteed as fund prices fluctuate based on market conditions.

How does a SIP Calculator work?

A SIP Calculator uses three main parameters to estimate the future value of regular investments.

1. Monthly Investment Amount

This section allows the user to enter the amount that one expects to invest in the mutual fund every month.

For example, an investor can choose to keep the monthly SIP at ₹500, ₹1,000, ₹5,000 or higher, depending on the minimum deposit in the scheme they want to choose and their financial capabilities.

2. Expected Annual rate of return

The rate of return in mutual funds can vary from fund to fund, and this section shows what one’s anticipated returns from the mutual fund may be based on the selected investment period.

For example, the annual return can range from 8% to 12% for different schemes based on risks and time horizons.

The projected returns are a hypothetical illustration meant to support the investor’s financial planning and are not an assurance of future returns or an indication of future performance.

3. Duration of Investment

This section is for entering the years you will make regular monthly payments into the mutual fund. One can view the returns for 1 year, 5
years, 10 years, 15 years, 20 years or any other option their SIP calculator might have.

Generally, the higher the time horizon of the SIP, the richer the potential returns may be, because regular investments get more time to
grow at compounded prices Once you enter these three values, the SIP calculator will estimate the invested amount, anticipated return and total future value of your SIP investment.

SIP Calculator Formula

A SIP Calculator estimates the future value of a monthly SIP using a mathematical formula. For example, a monthly SIP that uses end-of-month contributions has a formula that looks like this:

FV = P × \(((1 + r)\^n − 1) / r\) × (1 + r)

Where: FV: Future value of SIP

• P: Monthly SIP
• r: Monthly rate of return in a decimal (calculated by dividing the assumed annual return by 12)
• n: Total number of instalments

So, for an assumed annual return of 12%, the rate used to calculate future value will equal 12% ÷ 12 = 1%, or .01.

The additional (1 + r) at the end of the formula is used in calculators that use beginning-of-month instalments for SIPs. For the sake of illustration, end-of-month SIP calculations will take the formula to just:

FV = P × \(((1 + r)\^n − 1) / r\)

That calculation uses an assumed constant rate of monthly returns and is for demonstration purposes only. In reality, a mutual fund’s returns
fluctuate daily, as stock prices rise and fall.

Example of SIP calculations

Let’s say you have invested ₹5,000 every month in a scheme for a period of 10 years and have anticipated an annual return of 12% Your investment will see:

• Monthly SIP: ₹5,000
• Investment duration: 10 years
• Total number of installments: 120
• Assumed annual return: 12%
• Monthly rate to be used in the calculation: 1%

Total amount you invest will be equal to:

₹5,000 × 120 = ₹6,00,000

Using the end-of-month SIP formula, the final value will be approximately ₹11.50 lakh

Your estimated gains will be just about ₹5.50 Lakh.

These are approximate figures in this example that have been rounded for the sake of simplicity. The calculation assumes that returns will be
constant at 12% per annum.

Benefits of using a SIP Calculator

Using a SIP Calculator can help you become aware of the possible returns before you commit your money to a Systematic Investment Plan. Instead of randomly plugging numbers, one can experiment with different values to see the future value estimates.

1. Estimate your future investment value

One of the biggest advantages of using a SIP Calculator comes from its ability to help one understand and estimate the potential returns of
one’s investment.

By altering the amount invested, length ofthe investment and anticipated rate of returns, a user can compare potential scenarios to see what
works best for them.

2. Plan your financial goals

Your financial goals often call for different types of approaches and contributions. A specific target like being able to afford a car by a
certain date has different requirements than say, funding a full retirement.

A SIP Calculator helps one understand what anticipated monthly contributions to the fund might look like for a given target. That way,
a budget can be planned, and a contribution strategy can be executed when the time comes to meet the financial targets.

3. See the power of compounding

Compounding builds wealth overtime, wherein the yields from an investment reinvested, generate additional returns.

With a SIP, each month’s instalment has its own maturity period and therefore, its own contribution to compounding growth. This means that a
larger number of instalments will have to grow at a longer compounded rate for a greater future value.

A SIP Calculator helps investors see the potential of their investment at different time lengths, and different anticipated returns.

4. Compare different investment amounts

Maybe now isn’t the best time to invest a large sum of money, but want to see how regular smaller contributions to a SIP might fare in the
future.

For instance, a regular ₹2,000 SIP can be compared to a ₹5,000 SIP, or a ₹10,000 SIP. By changing the monthly contribution rate parameter and
calculating the estimated returns, one could determine what they are looking for in terms of returns.

5. Spend less time calculating manually

Trying to calculate potential returns every time you change an investible parameter can be tedious.

An online SIP Calculator can handle these estimates instantly, simply by typing in different values. You can experiment with different rates in
no time, instead of having to manually type in the formula each time.

6. Support informed investment decision-making

A calculator like this can help you quickly estimate future returns, and you can use that insight to get a better understanding of your potential
investment.

For instance, you may discover that your chosen SIP plan will give you adequate returns to meet a financial target, based on your assumptions. Or, you may notice that your current contributions, investment period, and anticipated rate of return won’t quite do the trick, and that something needs to change.

Remember that this tool is there to support decision-making and not to be used as a replacement for analysing your own risk tolerance,
financial capabilities and whether a given option suits you.

How to use the Goo Finance SIP Calculator

Getting to use the benefits of a SIP calculator are simple even if you are a SIP beginner. Here’s how to go about it:

Step 1: Enter your monthly SIP amount.

Enter the amount that you expect to invest into the mutual fund every month. Think about how much you can afford for a SIP contribution,
considering essential spends, debts, emergency savings, other expenses and financial responsibilities.

Step 2: Select your expected annual return.

Enter an assumed annual rate of return to see how much you can expect to make from your investment. Play around with different numbers on this front until you can see how sensitive your estimates are to different anticipated rates.

Step 3: Choose your investment duration.

Specify how long you plan to keep making SIP contributions by entering the number of years. You can see how your investment might turn out
based on how long you are looking to hold on to the fund.

Step 4: Calculate your estimated returns.

By clicking the ‘Calculate’ button, you can see what your anticipated future value is, based on the inputs. You can view the total amount you
will have to invest as well as the estimated investment gains.

Step 5: Compare different scenarios.

Change any input value to compare the changes in estimates. In doing so, you can help decide if your target and budgets come together well.

Step 6: Review your investment plan.

By using the outputs of this calculator, you can get a better understanding of your options to help plan your overall investments.
Remember to consider your risk tolerance, liquidity requirements, and investibility horizon before choosing whether to pursue an investment.

Start Planning Your Investments With Goo Finance

Building wealth takes time, and careful planning. Using a SIP Calculator can make this process easier by giving you an idea of how much you stand to make with your chosen monthly budget, time horizon and rate of return. With the Goo Finance SIP Calculator you can plan your
investments and see how different amounts and time-frames may help you to invest towards your goals. Start with an affordable monthly
instalment and keep in mind that the assumed rate of return is for example purposes only. Mutual funds are subject to market risk and past
performance does not indicate future results.

Start planning and calculating your goals with Goo Finance.

• Plan
• Learn
• Grow with Goo Finance.

Disclaimer: This page is for educational and informational purposes only and does not constitute investment advice, a recommendation to buy or sell securities, or a guarantee of returns. Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully and consider consulting a qualified financial adviser before making investment decisions.