SIP is an abbreviation of Systematic Investment Planning, an investment option in mutual funds to avoid risk, as it allows investors to purchase mutual funds at low cost by making investments at regular intervals. SIP is one of the most cost-effective ways to invest in mutual funds. Investing a fixed amount of income at regular intervals allows you to take advantage of the market’s unpredictability without worrying about the risk. In the section below, we’ll see how to calculate return on SIP.
Types of SIP
1. Perpetual SIP
This investment continues indefinitely without any fixed tenure or end date.
2. Flexible SIP
Flexible Systematic Investment Planning is an investment that allows you to make changes in investment amounts.
3. Set-Up SIP
Set-up SIP, also known as a Top-up investment plan, allows you to increase your investment amount over time.
How to Make an Investment in SIP
You might also wonder how to invest in SIP. So, here are some following points to discuss investing in SIP.
● Keep Your Goals Set
It is crucial to have a financial goal before investing; financial goals can be defined as the long-term financial objectives you seek to achieve with your wealth. Setting a goal will help you to factor in the amount you need to invest and the time you have to gather it.
● Choose the Right Fund, and the Amount you Want to Invest
Choosing the right fund or investment plan is important to get good and high returns when investing in SIP. Other than this, deciding the amount you want to invest weekly or monthly for a scheme that depends upon your needs is essential.
● KYC
Before investing in any mutual fund, you have to do your KYC registration. For KYC registration, you can visit any nearest bank or post office where prepaid cards can be issued to fill out the registration form. You can also apply for KYC registration online to avoid visiting the bank. Also, note that the application must include details such as name, address, photo, and id proof. So, make sure to prepare all your necessary documents ready in advance to avoid any trouble.
● Know Your Risk Appetite
Another important step or tip to consider before investing in SIP is to know your risk appetite, as the amount of money you want to invest is based on your risk tolerance and investment goals. Also, note that SIP returns are based on the market fluctuation of mutual funds in India and your chosen investment instrument.
How to Calculate Your SIP Return?
SIP meaning can be best described as investments can be made periodically, and the rate of return applied to your investment decide the final amount you will receive after selling. So, once you know your risk appetite, it is important to calculate the final amount and estimate the amount you should invest in your scheme.
Moreover, SIP returns can be calculated by dividing the total returns you receive by the total amount invested. And, to make this calculation more convenient, you can use a SIP calculator. Additionally, this calculator considers your initial deposit amount and how much money needs to be invested. Thus, you can use a SIP calculator to get an overview of the growth of your investment.
How Does SIP Calculator Work?
SIP calculators work on a formula that is:
Future Value of Investment = principal ×{[(1+Return/year)no.of contribution-1]÷return}×(1+return)
Advantages of SIP Calculator
- It gives you immediate results about the future value of your investment without much effort.
- It is very simple and can be used free of cost several times.
- It can give you an overview of how much you need to save to invest.
- SIP calculators can provide you with inflation-adjusted results about your future amount.
Conclusion
To sum up, Investing in SIP can help you create wealth for the long term for your family. But, investments are subject to market risk. Therefore it is important to have an overview of the estimate of the contribution you are making periodically and the returns you will get in the future. And by calculating your SIP returns, you can asses its performance over time and achieve your financial goals.
