Aditya Birla Sun Life SIP Calculator

What is SIP?

SIP or Systematic Investment Plan is a way of investing in Mutual Funds. Sometimes, potential investors think that SIP and Mutual Funds are the same, but in SIP, a person invests a certain amount of money on a monthly, quarterly, half-yearly or yearly basis. The decision is up to the investor.

SIP helps an individual to take advantage of the compounding effect. Apart from this, in SIP money is invested regularly, which allows one to become a disciplined investor over time. Implying that your returns, are reinvested every time to make more money for you, & as well cited, “The early you start, the more you earn”.

Fun fact

You can start an SIP with as little as 500 rupees per month, which makes SIP a popular tool for investment among people. SIP provides flexibility to investors, in choosing the amount, the frequency of deposits and the investment period.

Also, SIP is a liquid asset, i.e. it gives you the right to withdraw your funds whenever you need them. Just in case, if you draw them before maturity, a certain amount of money gets deducted from your investment amount.

What is a SIP Calculator?

A calculator is a utility financial tool that serves various functions like:

Time-saving	Using a calculator for solving complicated calculations can help in saving time
Accuracy	Calculators greatly ensure accuracy, especially compared to an average human mind
Reliability	The results of a calculator are reliable
Quick decision-making	Getting quicker results of complicated equations helps one in making quick decisions

The SIP calculator is a mathematical tool that helps individuals understand how much they need to invest regularly to achieve their financial goals. Or how much they will be able to earn if they invest a certain amount periodically.

The SIP return calculator helps an individual to understand and compare various mutual fund options with each other.

SIPs have lately gained popularity among millennials. Starting your investing journey through the help of a mutual fund empowers them to achieve financial freedom in future along with understanding the need for early investing.

SIP calculators do not provide you with the exact amount you will be receiving in future. It gives you a rough estimate of what you could expect in the future by investing a certain amount of money today.

The actual return on your investment is affected by various factors, such as filing charges, a commission charged by the company, current market dynamics etc.

Why you should use a SIP Calculator?

• Simplifies the process: Calculating the SIP return for a more extended period using a manual calculator is hectic, specifically, for someone not good with numbers. It doesn’t mean that one can’t learn about SIPs. That’s where online systematic investment plan calculators come to your rescue.
• Gives you an estimate of future returns: SIP calculators help you to know the future values of your investment. SIP calculators don’t provide you with the exact amount, you will receive in future. It gives you a rough estimate of what you could expect in the future by investing a certain amount of money today.
• Cost efficient: Most of the SIP calculators that are present online are free, like Groww SIP calculator, Upstox SIP calculator, etc. And especially nowadays, the fees of consulting a financial adviser with good experience are on the high end, & it only takes a few components or mathematical figures to calculate your ROIs.
• Time efficient: Calculating your SIP returns without the help of any online SIP calculator is a very time-consuming process. For people not acquainted with mathematical terms and technical jargon, it’s torment, to get the results manually. Using SIP calculators can save a lot of time.
• Helps in comparing different Mutual Funds: SIP calculators are used to compare different Mutual Funds. It helps an individual make the best decision possible for their financial goals. The returns from investment depend on the amount invested, the period of the investment and the percentage returns offered by the institution, which is different for every mutual fund.

How Does an SBI SIP Calculator Work?

The SIP calculator works on the following inputs:

• Monthly SIP Amount (P): The amount you invest every month.
• Yearly Growth Return (R): This is the anticipated rate of return you expect to earn yearly.
• Time Period (N): Number of years for which you want to invest.

The SBI SIP Calculator relies on the following simple formula to calculate returns:

SIP Future Value = P × {[(1 + r)^n – 1] ÷ r} × (1 + r)

P	Monthly SIP Amount
r	Monthly Growth rate = ( Yearly Growth Return ) / 12
n	Time period in months = Time Period * 12

Let’s work through an example for better understanding.

Formula to Calculate SBI SIP Returns with an Example

Consider an example for a better understanding.

• Monthly SIP: ₹10,000
• Time Period: 5 years (60 months)
• SBI SIP Interest Rate: 12% per annum (1% per month)

Using the formula:

FV = 10,000 × {[(1 + 0.01)^60 – 1] ÷ 0.01} × (1 + 0.01)

After calculation, you will get an approximate future value of ₹8,24,864.

In conclusion, your monthly ₹10,000 SIP invested at an annual growth rate of 12% for 5 years will grow to ₹8,24,864 at the end of 5 years.

What are the benefits of starting a SIP?

There are so many benefits of starting a SIP, some are listed below:

• Discipline investing: Starting an SIP before gives a sense of discipline to an individual. Since he or she knows, that they are obligated to invest a certain amount of money every month or so for a better future.
• Convenient form of investing: SIP is a convenient form of investing as you can start with as little as 500 rupees a month. & you can increase the amount in the later years of your investing journey.
• Tax Relief: Investing is a good way of saving your taxes because you are not obligated to pay tax on your capital gains from investment as long as you harbour them.
• Power of compounding: Warren Buffet once said that “ compounding is the eighth wonder of the world”. No doubt, he is right. Similarly, in a SIP, you get a return on previous returns. But one must have the patience to experience the power of the compounding effect.
• Liquidity: SIPs are liquid investments, which means you can redeem them or convert them into cash by contacting your asset management company.
• Professional management: SIP mutual fund investments are managed by professional portfolio managers. They have vast knowledge backed by professional experience so that you know your money is in good hands.
• Transparency: Nowadays, with all the platforms that are available online, it has become possible for people to keep track of their investments.