A Systematic Investment Plan or a SIP allows investors to invest
a fixed amount every month in a mutual fund. This helps average out the
purchase price, thus protecting them from investing a large amount at a high
point in the market.
It is quite a popular
concept among investors who use SIP calculators for ease to calculate
how long it would take a SIP of a given amount to reach a specific financial
goal. For instance, if your aim is to accumulate Rs 1 crore in 10 years, you
need a SIP of ₹45,000 per month at a 12% return.
How
Can You Reach Your Financial Goals through SIPs?
Investing in mutual funds SIPs is one of the ideal ways to
invest and get decent returns. Using a good goal-based SIP
calculator, you can get
an approximate estimate of the amount that you would regularly require to
invest to meet your financial goals.
Whether you're planning for a child's education, retirement, or
purchasing an expensive asset such as a house, you can make use of a sip
interest calculator that can help you get a rough estimate of the total
amount of money you need to keep aside to achieve your goals within a defined
period.
Let's understand this better with an example-
Mr. A is willing to invest around Rs. 50,000 a month in mutual
fund SIPs and plans to gradually increase the amount by 5% every year to
fulfill his goal of buying a second house by creating a total corpus of Rs 5
crore in the next 15 years.
So, how can he do this by investing in SIPs?
First, let's understand how much corpus Mr. A can create by
investing in a proposed SIP of Rs. 50,000 a month with an increase of 5%
every year.
In this case, let's assume an average return of 15%- 16% on his
equity mutual fund investments via SIP (based on the past returns from the mutual fund SIPs over the past few
years). With this run rate, the amount of corpus Mr. A would create roughly is
Rs. 3.50 crores which will not help him achieve his desired target. To be able
to achieve his target of Rs. 5 crores, he has two choices-
a. Increase his stipulated amount for SIP to Rs. 60,000/- from
Rs. 50,000/-
b. Increase the annual percentage rise in the SIP figure to 10%
from the initially planned 5%.
The best strategy here would be to invest SIPs in more selected mid-caps funds with a
combination of some small and large-cap schemes.
How Does the SIP Calculator Work Here?
The SIP calculator primarily
works by using some important data to compute your SIP investment that you
would need to make regularly. The
most important steps that you need to follow while using the SIP interest
calculator include-
- Enter
the target amount that you would need to complete your financial goal.
- Enter
the total number of years in which you would need to complete your goal
setting.
- Enter
the return rate expected.
Here is an example to understand the working of a sip
calculator mutual fund in more detail-
Mr. X has a target amount of Rs 60 lakhs in the next ten years
at an expected return rate of 12%. As soon he enters these details in the sip
interest calculator, it will display the SIP amount (and lump sum amount)
that Mr. X will have to invest to meet his desired financial goals.
Benefits of Using SIP Calculator
Some of the key benefits of using the goal-based SIP calculator
include-
- Helps
mutual fund investors strategically and efficiently plan their
investments.
- Simple
to use where the investor only needs to provide the financial goal
details, and the calculator will automatically display the investment
tenure and the results.
- The
SIP calculator is an excellent tool that simplifies complex mutual
fund investment calculations, thus saving a great deal of time.
- Free
to use and can be used online anytime, anywhere, thus simplifying the
overall investment process for existing and first-time investors.
To Conclude
PGIM India Mutual Fund offers an easy-to-use SIP calculator to
help you plan for your life goals with great ease. All you need to do is feed
your input in the SIP interest calculator, and based on your inputs, the
calculator informs you how much amount you need to invest per month to be able
to achieve your financial goals.
