A systematic investment plan, or an SIP, is a great way to build wealth over time. Designed to help you save regularly and invest in a well-diversified portfolio, SIPs offer a simple and effective way to build long-term financial security. But when it comes to planning your SIP investment, having accurate information is essential. One way to take most of the guesswork out of an SIP investing is to use an SIP calculator.
An SIP calculator is a handy tool that can help you plan and grow your investments in a systematic and efficient manner. Here are top three benefits of an SIP calculator that explain why most financial experts recommend using it to make the most out of your SIP investments.
- It makes goal-based investing much easier
An SIP calculator allows you to input your investment goals and then see how much you need to invest each month to reach those goals. For example, say you want to build a corpus of Rs 1 crore in about 20 years. You can input this goal in the SIP calculator, which will show that you need to invest Rs 10,000 per month in SIPs for 20 years at an expected annual return of 12% to achieve the corpus of approximately Rs 1 crore.
Similarly, if you are saving for your child’s higher education, the calculator can help you estimate how much you will need to invest each month to cover tuition and other related expenses. Thus, by predicting how long it will take you to reach certain milestones like building up an emergency fund or retirement fund, SIP calculators can help you avoid making costly mistakes when it comes to investing your money.
- Simplifies the process of investing
The biggest advantage of SIP calculators is that they are easily accessible and user-friendly. They are available online on different websites, and many of them are free to use. All you need to do is enter your monthly investment amount, the duration of your investment, and the expected rate of return. The calculator will then provide you with all the relevant information related to your SIP mutual fund investment.
This includes the total amount you will have invested at the end of the chosen period, the total interest earned, and the maturity value of your investment. This makes it very easy for first-time investors to calculate their returns and make informed investment decisions.
- You can forecast multiple investment scenarios for free
With an SIP calculator, you can compare different SIP plans free of cost and without having to contact a financial advisor each time. For example, if you are unclear about how changing your investment period or monthly investment amount will impact your returns, simply enter different values into the SIP calculator and see which option offers you the best results.
Most SIP calculators provide you estimates by considering three different growth scenarios –average, above-average, and below-average returns. You can pick a strategy and invest in SIPs according to your investment needs.
Closing thoughts
An SIP calculator is a useful tool for anyone who wants to invest in mutual fund schemes through systematic investment plans. Whether you are planning for retirement, saving for a down payment on an expensive gadget, or need to fund your child’s higher education, using an SIP calculator beforehand can help you stay diligent and make smart financial decisions.
