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SIP Calculator

Save money with SIP!

Discover how Systematic Investment Plan or SIP calculators can help maximize your mutual fund investments. These technologies revolutionize financial planning by providing accuracy and insight. Using SIP calculators, investors can maximize the potential for strategic wealth creation. Dive into the realm of educated decision-making and see your money grow.

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What is a SIP?

A Systematic Investment Plan (SIP) is a mutual fund investment strategy in which an investor makes regular, fixed contributions at predefined times. SIPs provide advantages like dollar-cost averaging and encourage financial discipline, making them a convenient and effective method to accumulate wealth over time.

Benefits of Investing through SIP

There are several investing benefits associated with investing through Systematic Investment Plans (SIPs). First, SIPs use dollar-cost averaging to spread investments across market highs and lows, possibly lowering total risk. SIPs also promote financial discipline by promoting monthly investments regardless of market circumstances and building a habit of constant saving and investing. 


Furthermore, SIPs allow investors to begin with small sums, making mutual funds investments available to a broad spectrum of people. This strategy uses the power of compounding to help investors accumulate wealth and achieve financial stability by reducing the impact of market volatility while also assisting them in maintaining focus on their long-term financial objectives.

How Does a SIP Calculator Work?

A SIP calculator works by forecasting future investment returns depending on user inputs, including investment amount, period, and projected rate of return. It uses a mathematical formula to anticipate the future value of investments, giving investors vital information about their prospective investment returns. This tool allows investors to make educated judgments, strategize effectively, and connect their investments with their financial objectives, optimizing their wealth-building path.

Calculating SIP Returns

To calculate SIP returns, SIP calculator functionality uses the future value of the annuity formula. This formula considers three significant variables:

  • The SIP investment amount (P)

  • The investment length in months (n)

  • The predicted rate of return per cycle

The formula is stated as follows:

  • FV = p × ({[1 + r]^n – 1} / r) × (1 + r)

  • The FV reflects the investment's future worth.

  • p represents the SIP investment amount.

  • The letter "n" represents the investment's term in months.

  • r represents the projected rate of return each period.

Take an example, you want to calculate the Future Value (FV) of a Systematic Investment Plan (SIP) with Rs. 500 monthly contributions for the 3 years or 36 months, with an expected rate of return of 10% p.a. Here’s the application of FV formula:

Sr. No.
Particulars
Amount (Rs.)
1

Per Month Contribution (p)

Rs. 500

2

Monthly Rate of Return (r)

10% p.a. or 0.10/12 months = 0.0083 (approximately 0.83% per month)

3

Total Number of Payments (n)

3 years X 12 months = 36 months

4

Future Value (FV)

FV = p × ({[1 + r]^n – 1} / r) × (1 + r)

5

FV Calculation

FV = 500 × ({[1 + 0.0083]^36 – 1}/0.0083) × (1 + 0.0083)

= Rs. 21,051.50

Using the above formula the SIP is calculated based on monthly contributions.


SIP calculators use these characteristics to predict the future value of assets, giving investors valuable insights into their investment returns. This allows investors to make more educated decisions, plan efficiently, and stay on pace to meet their financial objectives.

How to use Taxbuddy's SIP Calculator

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If you want to know how much money you will make in the future, enter the details under the ‘I Want to Invest’ tab such as: monthly investment, expected rate of return, and tenure (in years). Click on the ‘Calculate’ button. The result will be displayed on the screen.

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If you know your goal amount and want to determine the amount of monthly instalments, enter the details under the ‘I Know my Goal Amount’ tab such as: expected amount in future, interest rate, and tenure (in years). Click on the ‘Calculate’ button. The result will be displayed on the screen.

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Access the Calculator:

Navigate to https://www.taxbuddy.com/ > Resources > Calculators > Select SIP Calculator

Advantages of Using a SIP Calculator

Using a SIP calculator provides various benefits for SIP planning mutual fund investments. For starters, it gives clarity and precision in estimating possible returns, allowing investors to set attainable financial objectives. Furthermore, SIP calculators enable investors to experiment with various investing situations, allowing them to make educated selections consistent with their risk tolerance and investment goals. 


Furthermore, these calculators promote disciplined investment by demonstrating the long-term SIP advantages of consistent payments. Using SIP calculators, investors may optimize their investment strategy, track progress efficiently, and stay committed to their financial objectives, increasing their prospects of accumulating wealth and economic stability through systematic investing.

Investment Strategies

When developing SIP investment strategies, connecting them with your financial goals and risk tolerance is critical. Diversification, or spreading assets across several asset classes, is one technique for mitigating risk. Additionally, consider tactical allocating assets, which involves modifying your portfolio based on market trends. Reinvesting dividends is another approach for taking advantage of compounding. 


Dollar-cost averaging is investing predetermined sums regularly to smooth out market swings. Finally, frequently examine and rebalance your portfolio to ensure it aligns with your financial goals. By using these tactics, investors may maximize profits, reduce risks, and make steady progress towards their financial objectives.

FAQ

Frequently asked questions

Q

How accurate are SIP calculators?

A

SIP calculators generate relatively accurate estimations depending on the variables entered. However, they are based on assumptions about future returns that might change owing to market changes.

Q

Can I use a SIP calculator for any mutual fund?

A

Yes, SIP calculators may be used with any mutual fund if you provide the appropriate information, such as investment amount, term, and predicted rate of return.

Q

How often should I review my SIP investments?

A

It would help to examine your SIP investments regularly, usually every six months to a year, to ensure they align with your monetary objectives and market circumstances.

Q

Do SIP calculators consider market volatility?

A

Yes, SIP calculators use market volatility to predict returns. However, actual results may differ owing to volatile market changes.

Q

What is the minimum amount I can invest in a SIP?

A

The minimum investment amount for SIPs varies based on the mutual fund plan, although it is often relatively modest, commonly starting at Rs. 500 or Rs. 1,000.

Q

Can I change my SIP amount later?

A

You may alter your SIP amount later based on your financial situation and objectives by contacting your mutual fund provider.

Q

How does compounding affect SIP returns?

A

Compounding significantly impacts SIP returns since reinvesting profits over time leads to an exponential increase in investment value, boosting wealth generation.

Q

Can I use a SIP calculator for tax-saving mutual funds?

A

Yes, SIP calculators may be used for tax-advantaged mutual funds. They assist in accurately forecasting returns and successfully structuring investments for tax savings.

Q

What should I do if my financial goals change?

A

Review your investing approach with a SIP calculator if your financial objectives change. Adjust your SIP amount, duration, or investing approach to reflect your new goals.

Q

Are there any fees associated with using a SIP calculator?

A

Most SIP calculators are free to use online and do not need any payments. They provide a straightforward and cost-effective way to organize your investments.

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