SIP calculator…

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SIP calculator…

The insiders guide to SIP Calculators

The article is to discuss and explain the basics of SIP and how you can calculate SIP return or maturity value by yourself.

The Full form of SIP is systematic investment plan. It is the mode of investment in mutual fund schemes. The investment can be made in various mutual fund companies schemes. for example SBI MUTUAL FUND, HDFC mutual fund etc .

The simple way to understand Mutual fund SIP is, consider Bank recurring deposit (RD)schemes. As in bank Recurring Deposit scheme, a fixed amount is transferred from a savings account and deposited in a Fixed deposit account.

In the same manner in MUTUAL FUNDS,through SIPs, The desired amount is transferred from investors bank account to his/her mutual fund account.

Many of us confuse SIP as an investment. SIP in itself is not asset class which will generate return. SIP is a mode or method of investment in mutual fund schemes and not an investment in itself.

In the last few years, SIPs have gained good traction among Indian investors. In the Financial year 2016, the monthly mobilization through SIP mode was approximately 3660 cr, which has increased to 7724 odd crores in FY 2018-19. In a span of 3 FY, the monthly contribution has doubled. This shows convenience and usability of the product.

SIP Advantage and disadvantage

Below mentioned are the benefits of SIPs , which has made SIP as a investment mode popular.

Start with a small amount as low as Rs 100 per month.

Better risk diversification, as one doesn’t have to make his investment in one go and spread over a period of time.
Convenience to operate – Easy to start or Stop the investment .

Large sum of investment is not required for starting SIP.

The process to start investment through SIP are as follows …

· Select a mutual fund company and a particular scheme for investment like Equity mutual fund scheme, debt mutual fund scheme, etc.

· Decided on the amount of contribution and periodicity (monthly/quarterly etc) and time for investment.

Let’s take an example:

Assume Ram wants to do MONTHLY SIP of Rs 2000/-. The time for SIP is 5 years. The expected rate of return is 12% in equity-related schemes.

SIP CALCULATOR

There are thousands of SIP Calculator apps available on the internet, to give you an idea of how much you can expect as maturity for your contribution for a particular time period.

Here, I will guide you to make your own SIP calculator using spreadsheets.

Taking the above example –

Assume Ram wants to do MONTHLY SIP of Rs 2000/-. The time for SIP is 5 years. The expected rate of return is 12% in equity-related schemes.

In the excel, we need to use Future value (FV) formula to get the maturity value of SIP.

The various parameters required in the formula are….

Text Box: The return rate and time has to be changed to monthly as investment we do is monthly through SIP.
RATE – 12%/12 = 1%
TIME – 5*12 = 60

PV – Current investment – which is zero in our case

RATE – Return rate – Scheme expected return – 12% (in the example)

NPER – Time for investment – 5 years (in the example)

PMT – Monthly SIP amount – 2000/- (above example)

FV – Maturity value – needs to find out

Besides using excel formula, below mentioned are the indicative charts for SIP return calculation.

This will give you an idea as how much time and at which rate of return, the investment gets doubles.

For Example:

 SIP AMOUNT: 1000; TENURE: 5 YEARS;     

Therefore, total contribution: 1000*12(months in year) *5 (years) = 60,000/-.

The total contribution of 60,000/- will become 1,20,000/- in 5 years if the investment return is 28% per annum.

This is a very unlikely outcome for an investment. The reasonable expectation from Equity investment is 12% – 15% over a period of 3-5 years and above.

Example:

SIP AMOUNT: 5000; TENURE: 10 YEARS;   

Therefore, total contribution: 5000*12(months in year) *10 (years) = 6,00,000/-.

The total contribution of 6,00,000/- will become 12,00,000/- in 10 years if the investment return is 13% per annum.

The en devour is to give a fresh perspective for investment in mutual funds through SIPs. Happy investing from Shubhwealth.com

This Post Has 17 Comments

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    Nice info

    1. Shubh Wealth

      thanks..be in touch

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