What is SIP?
A systematic investment plan or SIP is an easy way to automate investing. Using SIPs you can invest a fixed amount of money periodically such as daily, weekly, monthly or quarterly in a stock or mutual fund of your choice.
SIPs are an easy and disciplined way of passive investing, as they eliminate the need to time the market. When you set up a SIP, your investments automatically buy more units when prices are low and fewer units when prices are high, because of the principle of rupee-cost averaging.
You can start your SIP investing journey with a small amount and increase your contribution as your financial situation improves. This way of investing through SIPs helps lessen the impact of market volatility while assisting investors in building long-term wealth through the power of compounding.
Each SIP instalment can start for as low as ₹10. You can set up SIP investments in Mutual Funds, Indian Stocks, and even US Stocks on the INDmoney app.
What is SIP Calculator?
SIP calculator is an online tool that calculates the possible returns on your SIP investments. You can input a few basic details to get an estimate of how much your investment can grow over time. Using this calculator, you can also find the amount of periodic investment required to reach your financial goal. A mutual fund SIP calculator helps users estimate the expected returns from their monthly SIP investments in mutual funds by allowing them to input their investment amount, expected return rate, and tenure to calculate the future value of their investments.
The SIP calculator will show you the total amount of money invested, the estimated future value of your investment, and your total gains. This is a great way to see the power of compounding in action.
However, you must note that the actual return rate offered by your SIP may vary from the expected rate of return due to various factors. The above SIP calculator does not provide information on the exit load and expense ratio (if any).
Using the SIP return calculator you can also compare the results from different SIP investments and make an informed decision about which one suits your investment goal.
How to use SIP Calculator?
The systematic investment plan calculator is quite easy to use and is highly convenient for beginners and new investors when calculating the return on SIP investment. There are two ways to use the SIP return calculator:
Investment Amount
If you want to calculate the future value of a given SIP amount, you should use this option. In this option, you can provide the following inputs:
SIP Investment Amount: This is the fixed SIP amount you want to invest at regular intervals
SIP Frequency: This can be daily, weekly, monthly, or quarterly
Investment Duration: The duration in years for which you plan to continue your SIP
Expected Returns: This is the expected rate of return on your investment
Once you follow the above steps, an SIP calculator shows you the total amount invested, the estimated future value of your investment, and total gains. It also shows the power of compounding on your SIP investment over your investment duration. You can see how you can multiply your investment using the SIP approach to investing.
Goal Amount
If you want to calculate the SIP amount required to reach a future financial goal amount, you should use this option. In this option, you can provide the following inputs:
Goal Amount: This is the target amount you want to achieve
SIP Frequency: This can be daily, weekly, monthly, or quarterly
Investment Duration: The duration in years for which you plan to continue your SIP
Expected Returns: This is the expected rate of return on your investment.
Once you follow the above steps, the SIP calculator shows you the SIP amount required to achieve your future financial goal in your defined investment duration. This can be very helpful for you when planning your future financial life goals. Using a mutual fund sip calculator, you can also estimate the expected returns from your monthly SIP investments in mutual funds by inputting your investment amount, expected return rate, and tenure.
With the INDmoney SIP calculator, you can plan, invest, and grow your wealth with confidence. Start using our SIP Calculator and invest today to experience the wonder of compounding firsthand.
How Can SIP Calculator Help Investors?
The INDmoney systematic investment plan calculator provides you with the future value of your SIP investments in a bar chart, which helps you easily visualise the investment growth. The estimated return will be based on the amount you want to invest, tenure, and return rate.
Therefore, by using the SIP return calculator you can have an overview of how your SIPs will perform over a chosen period, as per the rate of return and SIP contribution you have put in the calculator.
Let us look at the formula for SIP calculator and examples to see how this calculator can help you.
How does The SIP Calculator work?
An SIP calculator uses the following formula to calculate the future value of your SIP investment.
Where:
N = Total number of SIP instalments
Let’s understand how the formula works with the help of an example. Let’s say Mr Abhay invests ₹3,000 monthly for 10 years expecting a 12% return. The components of his investment would be as follows:
SIP Amount: ₹3000
SIP Frequency: Monthly
Expected Return (Per Year): 12%
Investment Duration: 10 Years
In this example:
Number of instalments = 120 (10 years * 12 months) SIP instalments
0.95% return rate per month equals 12% per annum
The total amount Abhay invested over 10 years = ₹ 3000 × 120 = ₹3.60 Lakhs
Based on the SIP calculations, the estimated future value of his investment would be ₹6,72,642 or ₹6.72 lakh.
This means Mr Abhay’s investment gained ₹3.12 lakh more.
Advantages of Using SIP Calculator
A systematic investment plan calculator serves as a valuable tool for investors to gain clarity on the growth potential of their investments and make informed decisions aligned with their financial objectives. Below, we’ve listed a few of these online calculator benefits:
Financial Planning: It helps in effective financial planning by providing a clear projection of the future value of investments, allowing you to set realistic financial goals.
Goal Tracking: It enables users to track their progress towards specific financial goals, such as purchasing a house, funding education, or building a retirement corpus, by providing a clear view of the potential returns.
Comparison of Scenarios: Users can compare different investment scenarios by adjusting variables such as investment amount, duration, and expected returns, enabling informed investment decisions.
Realistic Expectations: By using a systematic investment plan calculator, investors can gain a realistic expectation of the growth potential of their investments, helping them avoid overestimating or underestimating the future value of their SIP.
Informed Decision-Making: Using a SIP calculator empowers investors to make informed decisions by providing a data-driven understanding of the potential outcomes of their investment choices.
Power of compounding: Compounding works to grow your investment exponentially. Compounding means earning returns on top of your returns over long periods. This is why compounding can multiply your wealth manifold. It is difficult to do this calculation manually and estimate the power of compounding. The SIP calculator makes it easy to see compounding in action on your SIP investment.
Power of persistency: In SIP investing, it is crucial to continue investing over a long period. Continuing to invest during periods of market fall and rise can have a big impact on your SIP investment.
Types of SIPs
Check out the different types of SIPs to know which one is suitable for you:
Regular SIP
This is the simplest form of SIP investment. With this plan, you invest a fixed amount of money at regular intervals in a mutual fund of your choice. When setting up your SIP online, you choose how long you'll invest, how much you'll contribute, and how often. Once you’ve set your contribution amount, you can't change it later.
Perpetual SIP
Perpetual SIP allows you to continue investing without any end date. This is a common choice by investors who wish to start a SIP investment for the long term. You are allowed to stop the SIP at any time. You can do this by just informing the asset management company.
Flexi SIP
Flexi SIP offers you the flexibility to change your investment amount at any point in time, giving you greater control over your investment. Therefore, when market conditions are poor, and the prices of an asset are down, you can choose to increase your investment amount and vice versa.
Step-Up SIP
You can define a periodic increase in your SIP investment amount. This is especially useful for investors who want to increase their SIP contribution as and when their salary increases.
Trigger SIP
A Trigger SIP allows you to automate mutual fund investments based on specific events or conditions. Instead of investing at regular intervals, this type of SIP activates only when certain criteria are met, such as a market dip, a specific index level, or a particular Net Asset Value (NAV). This type of SIP plan is ideal for those who prefer to invest based on market conditions.
SIP vs Lumpsum: What to choose?
Investors are often divided between SIP or lumpsum investing. A lump sum investment involves putting the entire amount of money into an investment at once. This strategy is mostly chosen by investors who have a substantial cash windfall and want to invest it all immediately.
On the other hand, a SIP allows you to invest a fixed amount of money at regular intervals. This method benefits new investors by allowing them to take advantage of rupee cost averaging. By investing consistently over time, SIPs smoothen out the impact of market fluctuations.
Taxation on SIP Investments
Taxation of SIPs depends on the type of mutual fund and holding period of the investment. Since each SIP unit is considered a separate investment, they are redeemed on a first-in-first-out basis. For taxation purposes, under this method, it is assumed units that were first purchased are sold.
SIP in equity funds
SIP returns from equity funds are subject to capital gains tax depending on how long you hold the investment. If you redeem your investment within 12 months, short-term capital gains tax applies at a rate of 20%. Conversely, if you hold your investment for more than 12 months, your SIP returns will attract long-term capital gains tax. For long-term gains, up to ₹1.25 lakh is tax-exempt, and any amount exceeding this threshold is taxed at 12.5%.
SIP in debt funds
SIP returns in debt mutual funds are taxed at the applicable slab rate of the investors irrespective of the holding period for investors.
SIP in ELSS mutual funds
By investing in tax-saving mutual funds like ELSS, you can claim a deduction of up to ₹1.5 lakh in a financial year.
How to invest in SIP with INDmoney?
Here are three easy steps to get you started with INDmoney SIP:
Choose a mutual fund to make your investment in
Many mutual funds are available in the market for you to select from. Based on your investing objectives and risk tolerance, choose a fund. To start your investing journey, finish the KYC procedure.
Select how long to invest for
After choosing a fund, you must determine how long you want to hold onto your investment. The length could vary depending on your investment objectives, from six months to ten years.
Make regular investments
Decide which day each month you would like to invest. One easy and practical way to build wealth over the long term is through SIP investing. It is crucial to continue investing for the full term of the investment because of this.
Frequently Asked Questions
Can I save tax on my SIPs?
Yes, you can save tax on your investment if you choose to invest in ELSS mutual funds.
What are my SIP rates?
The SIP rates are linked to market performance, so you can look into the past year's performance to have an estimate of the possible rate.
How to choose my SIP?
You can check out the curated list of best SIP plans here.
Can you change SIP?
Reviewing your SIP investments at least once a year is advised. Comparing the performance of your investments with your financial objectives can assist you in staying on track by helping you make the required modifications, such as raising your SIP amount or altering your investing approach.
Is SIP tax-free?
A SIP (Systematic Investment Plan) is simply a method of automating your investments. Hence, it does not impact taxation on your investments in any way. However, the returns made from SIP investment attract capital gains tax depending on your holding period.
How to calculate CAGR for SIP Investment?
In SIP investment, the instalments may be irregular and can also be of different amounts at different periods. In this case, it is best to use XIRR to calculate returns on your SIP investment. This can be done easily on MS Excel or any other spreadsheet app.
CAGR is calculated as point-to-point returns and is not suitable for SIP investments but works well for lumpsum investments.
What happens if I miss a SIP instalment?
In case a SIP instalment is missed, due to insufficient balance in your bank a/c, your bank may charge you a small fee in some cases. Please check these details with your bank. There is no other impact on your SIP.
Can I stop my SIP?
Yes, you can stop your SIP at any time. On INDmoney, if you invest via Flexi SIP, you can choose to pause and restart your SIPs at any time.
Is SIP better or lumpsum?
The answer depends on your goals and financial situation. If you have a large sum of money to be invested, a lumpsum approach is better. However, if you are looking to automate investing for the long term in a disciplined manner, the SIP approach is more suitable.
