SIP Calculator

What is SIP?

SIP or Systematic Investment Plan is a way of investing in Mutual Funds. In this, money is invested regularly, which allows one to become a disciplined investor over time. It helps an individual to take advantage of the compounding effect.

SIP is the most preferred method of investing in mutual funds. Investors can stop or modify the SIP whenever they want.

A few investors think that SIP and Mutual Funds are the same, but Mutual funds are an investment option, and SIP is a method to invest in Mutual funds. In SIP, a person invests a certain amount of money on a monthly, quarterly, half-yearly, or yearly basis.

Fun fact

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

What is a SIP Calculator?

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 can earn if they invest a certain amount periodically.

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

SIP calculators do not provide you with the exact amount you will be receiving in the 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 depends on various factors, such as future market returns and dynamics, expense ratio, etc.

Why you should use a SIP Calculator?

• Simplifies the process:Calculating the SIP return using a regular calculator is hectic, specifically for someone not good with numbers. That’s where online SIP calculators come to your rescue.
• 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; it gives you a rough estimate of what you could expect in the future by investing a certain amount of money today.
• Time Efficient:Calculating your SIP returns without the help of an SIP calculator is a very time-consuming process. For people not acquainted with mathematics, it’s torment to get the results manually. Using SIP calculators can save a lot of time.
• Helps in comparison:SIP calculators are used to compare the returns of different Mutual funds. The returns from an investment depend on the amount invested, the period of the investment, and the potential returns given by the fund, 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 numerous benefits of starting a SIP:

• Discipline investing: Starting a SIP gives a sense of financial 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: SIP is a convenient form of investing as you can start with as little as INR 500.
• Professional Management: Doing SIP in mutual funds means your investment is in good hands, as mutual funds are managed by professional fund managers with vast domain knowledge.