How does an SIP calculator set you on your path to financial success?

Making informed decisions is paramount when entering the high-risk, high-reward mutual fund market. While a Systematic Investment Plan, popularly called SIP, reduces the risks significantly, a SIP calculator can help you refine your investment strategy. Read on to know the many benefits of using a SIP calculator before investing in SIP schemes.

What is a SIP?

A SIP or Systematic Investment Plan is one of the two ways of investing in mutual funds in India, the other being a lump sum. When you choose the lump sum mode, you need to pay any amount above INR 5,000 in a mutual fund scheme. In contrast, SIP investments usually start from INR 500. But, unlike a lump sum investment, you need to pay the SIP amount every month for as long as your mutual fund SIP scheme account remains active.

SIP enables investors to beat volatility better since you automatically get more units when the NAV is low and vice versa. Hence, your purchase cost is the average of all purchases you have made in the SIP scheme.

How to Use a SIP Calculator to Calculate the SIP Amount

You need to enter the following four figures on a SIP calculator to get an accurate estimate of the amount you must invest in a SIP scheme:

• Step 1 - Enter the current cost of your financial goal, such as a vacation, house, motor vehicle, wedding, children's higher education, etc.
• Step 2 - Enter your investment term. Enter any term between one year and twenty-five years.
• Step-3 - Enter the inflation rate.
• Step-5 - Enter the rate of interest. The interest rate is also known as the CAGR or Compounded Annual Growth Rate of a mutual fund scheme.

Let's understand this with an example.

Suppose you want to buy a house after ten years. The house's current value is a little above INR 1 crore. If the inflation remains stagnant at 5%, you will need INR 1,67,05,451 to buy the home after ten years. Considering that the SIP scheme's interest rate remains 10% on average, you need to save INR 81,552 every month to reach your goal conveniently.

What are the Benefits of Using a SIP Calculator?

1. Plan Your Finances Better - A SIP calculator lets you align your financial goals with your investment strategy. Since the calculator automatically computes the future value of an asset, you know the amount you need to save every month to achieve the goal.
2. Get Instant Results - A SIP calculator saves you from the hassles of multiple calculations. It also provides you with instant results. You can key in just four figures and get easy access to the amount you need to save every month.
3. Choose the Best Mutual Fund Scheme - All mutual fund houses publish information on fund returns, including CAGR and minimum investment amount. You can use this information to scan the most popular mutual fund schemes and select the best SIP scheme.
4. Free to Use - An online SIP calculator is free, and anyone can use it as many times as they want. Hence, you don't have to go anywhere or stand in a queue.
5. Invest Seamlessly - Mutual fund houses like PGIM provide an 'Invest in SIP' tab beside the calculator. After calculating, you may click on the tab, submit your KYC (Know Your Customer) details, and create a SIP account in two minutes.

Investing Made Easy!

Investing in SIP schemes is no more an arduous task when you can access the best online SIP calculator for free. PGIM provides low-investment, high-yield mutual fund schemes across categories like equity, debt, hybrid, and the like. Ensure to go through the offer document and check the SIP calculator before investing in a SIP.

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