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September 21, 2023

How to Calculate Your SIP Returns for Upcoming Years?

The popularity of mutual funds and SIP investment is rising rapidly in India, with asset management firms adding more than 51 lakh accounts in the June 2022-23 quarter alone. The reason for this growth is simple – the SIP route makes investment incredibly easy. Even someone at the start of their career can begin their investment journey by just putting aside ₹500 per month in a systematic investment plan.

Not sure how much you should invest each month to achieve your financial goals? That’s become easy too with the availability of SIP calculators online. All you need to do is provide basic information into the mutual fund calculator and it tells how much you should invest and for what timeframe to achieve your goal.

Want to know more about such a calculator to decide on monthly SIP payments? Here’s what you need to know.

How the Calculator Works

To calculate your returns on SIP investments over a certain time period, you will need to provide certain information, such as:

  • Total investment: This includes the deposits you will make and the intervals you will make them at, such as weekly, monthly, quarterly, yearly.
  • Timeframe: The total period for which you want to remain invested in the mutual fund.
  • Interest Rate: Check the interest rate per annum offered by your chosen fund.

After you have input all these details, your returns can be calculated based on the following formula:

Amount invested × ({[1 + Periodic rate of interest] Total number payments – 1} / Periodic rate of interest) × (1 + Periodic rate of interest)

Let’s understand this with the help of an example. Suppose you decide to invest ₹1,000 each month for 2 years. The total investment will amount to ₹24,000. Now, let’s say the interest rate you receive is 10% per annum. Using the above formula, after 2 years, you will receive ₹26,667.

Of course, manually calculating is not just confusing, it could lead to errors. It is best to leave the complex math to the online SIP calculator.

Benefits of Using an Online Calculator

A mutual fund calculator is a quick and easy way to ensure that your investment portfolio is aligned with your investment goals and timeframe. Some of the other advantages of using this tool are:

  • It can help you plan your finances well to secure your future.
  • It can help you estimate the returns on your investments at the end of the tenure. This can help you understand whether to increase the invested amount or the timeframe of investment for better gains.
  • It eliminates the possibility of human error in your financial decision-making process.
  • It is easy to use, even for first-time investors. In fact, it is completely free, and you can use it as many times as you need to.

So, go ahead and bring peace of mind for yourself and your family by planning your financial future with support from an SIP calculator. The earlier you start, the more time you give your investments to grow.

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