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Investments play a significant role in the mapping and fulfilment of your financial objectives. With proper investments in place, you can not only achieve your financial goals but ensure your financial security as well.

A Systematic Investment Plan (SIP) is one such mode of investment to grow your wealth, with this method helping you invest in mutual funds. With an SIP, you regularly invest a portion of your funds in mutual funds to grow your funds over time. However, before making investments, it is essential to understand what returns should you expect from your SIP investments. Computing the returns manually can be a tedious task. This is where an SIP investment return calculator comes into the picture.

An SIP investment calculator is an automated online tool that computes your returns on SIP investments within a few minutes. You can simply provide the required information in the specified fields to will receive the estimated amount in an instant. To know more about how the SIP investment calculator works, its features, and its benefits, continue reading the article below.

What is an SIP?

A systematic investment plan is a technique to put your money in mutual funds. With the help of SIPs, you can organise your investments to fulfil your financial goals in the long run. To invest in mutual funds using an SIP, you would be required to estimate the target amount and the amount you would need to invest in the mutual funds periodically.

As opposed to other investment techniques, an SIP does not require you to pay a lump sum amount to invest in mutual funds. This can be quite helpful, as you, as an investor, would be able to make investments at your convenience by setting aside a portion of your funds. Unlike other investment techniques, SIP uses a structured approach to ensure that you achieve your financial goals without compromising on your present needs and helps you develop a financial discipline. As this is a highly accessible and convenient mode of investing, anyone can make investments using the SIP method.

However, listed below are the categories of individuals who should certainly give this method a try –

  • Individuals planning to make long-term investments
  • Amateur investors
  • Individuals who can only invest a fixed portion of their income
  • Individuals with low-risk appetite

What are the Different Types of SIPs?

Discussed below are the major types of SIPs –

  • Fixed SIP – This is a basic SIP mode, where you select the amount and the date till which you will make your contributions. The remaining process is automated, as the investment amount would automatically get deducted from your bank account on the set date.
  • Top-up SIP – Under this SIP method, your contributions towards mutual funds increase periodically. This type of SIP would be suitable for you if you are a salaried employee who gets annual appraisals or salary hikes, as you can easily contribute this increment or a portion of it towards the mutual funds.
  • Flexible SIP – This SIP method provides you with the flexibility to make changes in the amount for each contribution or even leave out a few contributions if required as per your current financial condition.
  • Perpetual SIP – This type of SIP is a fixed SIP without any duration. Once you register your bank account and decide on the investment amount, the money will be automatically debited from your account every month. This SIP contribution will continue unless you request the fund house to stop the withdrawals

As you may guess, this SIP technique is ideal for those who do not want to limit their investments to some number of years. Notably, perpetual SIP also eliminates the need to renew the investment plan.

What is an SIP Investment Return Calculator?

An SIP investment calculator is an online tool that can help you determine the approximate returns you can expect from mutual fund investments when you invest in an SIP. Using this tool, you will be able to figure out the amount that you should invest to achieve your financial target over the years.

It’s crucial to note that your actual return may differ from the estimated amount based on several factors. Moreover, the calculator does not provide information about exit load and expense ratio. With an SIP investment return calculator, you can generally compute only the wealth gain and the anticipated returns from your monthly investments.

Benefits of SIP Investment Calculator

SIP is one of the best ways for beginners to mobilise their small savings and invest them smartly to achieve financial goals. However, to determine the amount that they need to invest, the target amount, and the period required to achieve the target, they would be required to make the required calculations.

This is where an SIP investment return calculator comes into the picture, as you can determine all those details without straining yourself with tedious calculations.

Other than that, some more benefits of using a SIP investment calculator are discussed below –

  • It is an automated tool that uses an automated process to determine the anticipated returns that you would accrue by investing a small amount periodically. With the help of the SIP investment return calculator, you can systematically plan your investments to achieve financial objectives in the long run.
  • The tool is easy to use as it doesn’t require you to provide any extra information other than monthly investments, expected return rate, and the tenure of investments.
  • If you are a beginner, you can use this calculator to understand the technical know-how of SIP investments.

How Does an SIP Investment Return Calculator Work?

An SIP investment return calculator estimates the target amount using the compound interest formula. It considers the number of times compounding is applicable and determines the returns on investment.

To know about the estimated returns, you would have to provide these details to the calculator –

  • The monthly investment you plan to make
  • The duration of investments (in years)
  • The expected return rate on the SIP

With the help of the SIP investment calculator, you can get clarity regarding the following –

  • How much do you need to contribute every month to reach the target?
  • How does inflation influence your investment amount?
  • What profit will you make on the investments?
  • How much return will you make once the tenure ends?

You can use the SIP investment calculator even if you have a targeted amount. The calculator, in such a situation, would help you estimate the amount that you would need to invest monthly and for what duration.

SIP Calculator
Monthly Investment
AED
(From AED 500 to AED 100,000)
Expected ROI(p.a)
%
Reducing Rate (1% - 30%)
Time period
Years
(From 1 to 40 Years)
Invested Amount

AED 0

Est. returns

AED 0

Total Value
(Invested Amount + Est. returns)

AED 0

Things to Keep in Mind When Investing through SIP Investment

SIPs allow individuals to periodically invest in mutual funds, which can generate good returns over time while balancing the market risk. However, the risk associated with the market is not eliminated with mutual funds. Moreover, certain fees are also applied to mutual funds that you must consider before initiating your investment.

Discussed below are some aspects to take into consideration before making mutual funds’ investments using the SIP method -

1. Identify Your Goals

You should be clear on why you want to make investments via the SIP method, whether to have a financially secured retirement life, pay for your child’s higher studies, or any other such goal.

Once you set the goal square, you would be able to decide on the type of scheme, frequency of investment, duration of SIP, and the contribution amount. You can even start separate SIPs for each goal to scale your investments efficiently.

2. Check the Performance of the Mutual Fund Scheme

Before investing in a mutual fund scheme through SIP, make sure that you check how the scheme has performed over the past 1, 3, or 5 years, and more. The comparison should be against the set benchmark, peer funds, and the fund category. You can invest your money in diversified equity funds that have set a record to outperform the average and benchmark returns of a given category.

3. Evaluate Your Risk Profile

Mutual funds are categorised into low, medium, and high-risk investment instruments. The risk profile of each scheme depends on the type of securities and asset classes the funds are invested in.

Before making any investment in mutual funds through SIP, you should assess your risk appetite. You can evaluate your risk profile based on your age, investment horizon, discretionary income, immediate financial commitments, and more.

You can balance your risk by uniformly distributing your investments in multiple mutual funds of different risk profiles through SIP. As a general rule, investment in equities brings more risk compared to investment in government bonds. Thus, you should opt for mutual funds that combine the two types efficiently, although you can even go for separate funds related to each category.

4. Evaluate the Fund House’s Performance

Before starting to invest in mutual funds using the SIP method, you should analyse the fund house’s market performance. Check its credentials for factors like the fund manager’s expertise and the types of assets the fund house maintains. You should consider opting for a fund house that has given a consistent performance over the years.

5. Expense Ratio

Another key aspect to check before investing in mutual funds via the SIP method is to check the fund’s expense ratio and the entry and exit loads charged upon redemption. Consider checking the fund fact documents, performance tracking investments, and portfolio statements, as checking the expense ratio will help you get better clarity about the SIP investment amount.

In a Nutshell

An SIP investment calculator is a digital tool that can help you find out an approximate target that you may achieve by making periodic contributions to mutual funds. You can use the SIP investment return calculator to calculate your wealth gain and expected returns on investments. The calculator is easy to use and is beneficial in planning how to invest the funds in a way to achieve the financial objective in the set duration. Beginners can also use this tool to understand how SIP investments work, what amount they should invest, and more.

To know more about SIPs and SIP investment return calculators via a few questions, go through the FAQ section below:

FAQ's

Q1. How does the SIP investment return calculator help in choosing SIPs?

Ans: The SIP investment calculator provides an estimated value of your investments after certain years. This can help you figure out how much to invest to reach the target as per the given rate. Thus, you can use SIP investment calculators and play around with different interest rates and investment amounts to find a plan that can help you reach your financial goal without straining your regular expenses.

Q2. Can you modify your SIP amount?

Ans: Depending on the returns on the investment, you can always make changes in the SIP investment amount.

Q3. Are SIPs similar to mutual funds?

Ans: SIP is a method to invest in mutual funds and not a mutual fund or the market asset itself. It is an investment technique where you periodically and regularly invest your funds in a mutual fund scheme.

Q4. What are some benefits of SIP investment calculators?

Ans: Here are a few benefits of SIP investment return calculators –

  1. Online and free-of-charge calculator
  2. Easy to use
  3. Can be used by beginners

Requires no additional, complex details to compute the anticipated returns

Q5. What are some benefits of investing in mutual funds using the SIP method?

Ans: Given below are the major advantages of investing via SIP –

  • Professional fund management
  • Financial discipline
  • Helps in achieving future financial goals without compromising the present needs
  • Uses the power of compounding
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