People are often concerned about the existing financial situation and constantly strive hard to ensure that they are able to build wealth over the long term. Often such individuals are unsuccessful particularly for one reason – they are unable to remain consistent with their investments. Also, to create a wealthy corpus, one must remain invested for at least 15 to 20 years. Such a commitment is not easy which is why most investors give up midway. However, if you are planning on building long term wealth with mutual funds, you can consider investing in them through the Systematic Investment Plan.
What is a Systematic Investment Plan?
There are two primary ways in which you can invest in mutual funds – one is through a lumpsum investment and two is through a Systematic Investment Plan. A Systematic Investment Plan is a simple and effective way for anyone to start their mutual fund investment journey as they can start by investing an amount as low as Rs 500 every month. SIPs come in various forms – weekly, quarterly, monthly, biannually, and yearly. However, most young investors prefer the monthly SIP option as this allows them to religiously save and invest a fixed sum from their monthly income.
All an individual has to do is decide how much the SIP investment should be, then decide a mutual fund scheme of their choice and then start investing in that scheme via SIP till their investment objective is accomplished. Unlike some conventional schemes, SIPs do not have a lock-in period and are highly flexible in nature.
Long term investing in mutual funds via SIP might help investors in achieving their long term financial goals like retirement planning, buying a bigger house, securing children’s financial future, etc.
What is a SIP calculator?
Sometimes investors are in a dilemma when beginning their mutual fund investing journey with SIP. They are concerned and want to know the total returns which their SIP investments might be able to fetch at the end of their investment journey. Sometimes, investors aren’t sure about how much to invest monthly via SIP so that they can get closer to the desired corpus.
Such calculations can be easily computed using the SIP calculator, a free online tool. The SIP calculator is designed in such a way that it can compute SIP related calculations in a jiffy. If an average human has to sit with pen and paper to make the calculations that the calculator computes in seconds, it might take a lot of time. Hence, the SIP calculator acts as a time saving tool which any layman can use.
Why investors should use the SIP calculator?
We will demonstrate an example to understand the importance of SIP calculator –
Let us assume that your goal is to build a corpus worth Rs 10 crores in the next 10 years. You are currently investing Rs 5 lacs every month via SIP. If you continue this way the at the end of the investment horizon you will only be able to earn Rs 11.5 crores.
You need an SIP calculator to determine the exact monthly SIP sum.
In the SIP calculator, enter –
- Total wealth you want to earn – Rs 20 crores
- Time horizon – 10 years
- Expected mutual fund rate of return- 12%
The SIP calculator will display the following results –
- Monthly SIP investment amount needed – Rs 8.69 lakhs
- Total invested sum – Rs 10.43 crores
- Total wealth created – Rs. 20 crores
The SIP calculator was successful in helping you realize that you were falling short in your SIP investments and recommended an amount that if you invest regularly might help you achieve your ultimate financial goal.