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Know how an SIP calculator helps you assess your mutual fund SIP returns

Before beginning with your mutual fund investment, a basic confusion you may have in mind is which option must you go for – lumpsum or SIP (systematic investment plan) to invest in the mutual fund scheme of your choice. As SIP mode allows you to start with your investment in a mutual fund with a small amount of as low as Rs 100, many would obviously consider going for this route. However, before starting with SIP, you must ensure to assess the corpus requirement and time horizon to meet your crucial financial goal. For this, you must take the help of an online mutual fund SIP calculator.

An online SIP calculator calculates the figure you must invest periodically i.e., often monthly to earn a particular corpus. To put this in simple words, an online SIP calculator serves as a roadmap to achieve your distinct crucial financial goals. Using it, you can effectively compute your complicated financial calculations without the need for paper or pen. You just require entering in a few important inputs and the online calculator will arrive at the result in just seconds.

An online SIP calculator requires three inputs. These are –

  • Monthly investment
  • Investment time-period
  • Expected annual returns

You must ensure to place these figures on the calculator according to your budget and cash inflow. Note that if the outcome is not as per your preference, you can also make changes to any of the inputs to compute your preferred result.

For instance, suppose you are 10 years away from reaching your retirement age and post 10 years you require an overall corpus of Rs 2 crore to continue with the same lifestyle. To accumulate this post-retirement corpus, you must use an online SIP calculator to know the investments you must make monthly to build a post-retirement corpus of Rs 2 crore in 10 years. According to the computations, to accumulate a post-retirement corpus of Rs 2 crore in 10 years, you must contribute a monthly SIP amount of Rs 77,300 at an assumed return rate of 14 per cent per annum.

A few online SIP calculators even come with an additional input known as “adjust for inflation”. In the case you are not aware of the future value of your life goal after factoring in inflation, then you may use this option too. Note that according to financial advisors, you must include inflation in your computation as this endows you with a realistic figure concerning your overall corpus earnings. A few of the online SIP calculators might even come with a graphical representation showing the growth of your earnings on a yearly basis over the SIP investment period.

What if you decide to go for the lumpsum investment mode?

In the case you hold a lumpsum investible amount, then you may consider going for the lumpsum investment route. However, for this, you must ensure to time your mutual fund investment. Ensure to invest in mutual funds through the lumpsum mode during the bearish market conditions as this allows you to buy a higher number of quality mutual fund units at a lower value. You can liquidate these bought units later when the market moves upward at a profit. In case you are unsure about the lumpsum investible fund that you must invest to meet your long-term goal, then you may take the help of an online lumpsum calculator.

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