Systematic Investment Plans (SIPs) are one of the most preferred ways to invest in all kinds of mutual funds. They offer the benefits of easy accessibility, rupee-cost averaging, compounding, and more. But before you start an SIP in a mutual fund of your choice, you should plan for it smartly using an SIP calculator.
An SIP calculator is a free, online tool that is offered by some of the best Asset Management Companies (AMCs) in the country. With the help of an SIP calculator, you can begin your mutual fund investment journey confidently. There are several ways in which an SIP calculator can be used to your advantage. Here are some of them.
- Helps make goal-based investments
Most investments are made with a specific goal in mind and an SIP calculator can help you undertake goal-based investing. For instance, if you know you want to buy a car in three years and you know you need to have Rs 6 lakh for that, then you can use an SIP calculator to determine how much money you need to invest through an SIP in a mutual fund to meet that goal. In addition to knowing your goal amount and the number of years you have, you also need to know the expected rate of return of the mutual fund you are planning to invest in.
- Allows you to plan financially
It can also be the case that right now you do not know what goals you want to meet but you do want to invest money. In that case, an SIP calculator can help you plan financially for a secure future. You can enter the amount of money you want to invest monthly, the time period for which you want to invest, and the expected rate of return, and the calculator will show you how much your investment will amount to at the end of the investment period.
- Assists you in staying motivated
When you use an SIP calculator, it helps you visualise how much your money can grow over time owing to the power of compound interest. The longer you keep your money invested, the more it will grow. Hence, any time you feel tempted to withdraw your funds or stop your SIP to meet some short-term discretionary expenses like buying a new gadget, you can use the SIP calculator to realise the opportunity cost of using your investment money.
An SIP calculator, in this way, can be useful in different stages of your investment journey. It is also easy to use with a simple interface, so you won’t have to spend any time figuring out how to use it. Moreover, the results calculated are accurate and quick, so you don’t need to bother with manual calculations and complicated formulae. You can use an SIP calculator as many times as you’d like without any charge and hence can also compare different SIP options to decide which works best for you and your financial goals.