How a Mutual Fund Calculator Will Help You Investing In Funds?

The SIP calculator or the mutual fund calculator is a simple tool that enables individuals to have an idea about the returns on their mutual fund investments. Speaking of the present times, mutual funds have become an important and popular investment option, especially for millennials.

But, what makes them so important? Why is there an increase in the mutual fund investment despite it being subjected to market risk? To know it all, read on.

First Things First: What Is The SIP Calculator?

The SIP calculator is designed to provide potential investors with an estimate on their mutual fund investments. Although, the “actual” return offered through the mutual fund scheme could vary on multiple factors. 

The SIP return calculator calculates the “expected” return on investment and the wealth gain for your monthly SIP investment. In other words, a rough estimate of the SIP maturity amount, based on the annual return rate.

Note - The SIP calculator does not provide clarification on the expense ratio of the amount and the exit load.

What are the Different Types of SIPs?

There are four different types of SIPs available in the market. These are:

• Step-up/top-up SIP - This enables an individual to increase the amount of investment automatically, at a percentage or amount
• Perpetual SIP - It enables an investor to keep investing as long as one wishes without any end date
• Trigger SI - Trigger SIP allows the investor to start investing in a specific index level, date, event, or NAV
• Flexible SIP - It lets the investor change the investment amount as per the preference

How Does the SIP Return Calculator Help In Investing Funds?

According to the mutual fund investors, the SIPs are a lucrative mode of investing mutual funds when compared to the otherwise lump sum amount. The calculator helps as a financially disciplined medium that creates a saving habit, benefiting you in the future.

SIP online calculator or a mutual funds calculator is a beneficial tool that also shows the investor the estimated return that one can earn post the tenure of the investment.

Here are a few benefits that are included in a SIP calculator–

1. It assists an investor by determining the amount on wants to invest
2. Gives you the total amount invested
3. Gives an estimated value on the mutual fund returns 

How Does a SIP Calculator Work?

Simply put, the SIP calculator or the mutual fund calculator operates on the following formula-

M = P × ({<1 + i>n – 1} / i) × (1 + i).

Here - 

• M is the amount received upon maturity
• P, the amount invested at regular intervals
• n is the number of payments one has made
• I, the periodic rate of interest on the fund

Let’s understand this with an example:

Sam wished to invest up to Rs. 1,000/month for 12 months in a periodic rate of interest at 12%. Taken the number above, the monthly rate of return would be = 12%/12, that is, 1/100=0.01

Therefore, M = 1000 x (<1+0.01>12  - 1/0.01) x (1+0.01)

This gives Rs 12,809 as an approximate for a year.

Note - The rate of interest differs as per the market conditions, that is, it may increase or decrease, changing the estimated returns

To Conclude: What are the Things to Keep in Mind When Choosing the Best Mutual Funds?

Here are a few ways that can help choose the best mutual fund options to invest in:

1. Identify the goals and your risk tolerance
2. The kind of fund type are you interested in or the kind offered
3. Fees and loads 
4. Make sure to evaluate the past results and the managers
5. Know the size of the mutual fund

With the pointers above and the information in the article, we hope you are now aware of the SIP return calculator and the types and kinds of investments to choose from.

FAQs: How Mutual Fund Calculator Will Help You Investing In Funds?

• How much can an individual invest in a SIP?

When it comes to investing in SIP, there is no limit bound to the amount of the investment. Nevertheless, the minimum amount an investor can invest is Rs. 500/month.

• What is the maximum investment tenure in a SIP?
  
  There are no limitations for the maximum SIP tenure. In other words, an investor can choose to invest as long as they can with a minimum tenure of 3 years.

• Is SIP the same as mutual funds?

Most often people tend to confuse themselves with these terms and think that the SIP and mutual funds are different. 

In fact, SIP is just a style of investment, not a scheme or stock avenue that is used to invest periodically in a fund or scheme of your choice.

• Can one modify the SIP amount?

Yes, one can easily modify the SIP amount using the SIP investment calculator and also increase or decrease the amount.

• Does SIP allow an equity mutual funds investment?

No, they don’t. You can invest in hybrid or debt mutual funds through SIP.

• Is it possible to renew a SIP?

Yes, it is possible to renew a SIP, automatically. There are many companies that provide the option to cancel the auto-renew feature too.

• Is it possible to pause investment in a SIP?

Funds are flexible, therefore, it is possible for an investor to pause their investments. There are mutual fund companies that provide the investor with an option of pausing the SIP investments up to a specified period.