SIP Calculator

Calculate returns on your SIP investments.

years

Amount Invested vs Returns

Expected Amount Rs.
Amount Invested Rs.
Wealth Gain Rs.
Assumed annual inflation rate is 6%

Best performing mutual funds

Mutual Fund Annual_Returns Risk
SBI Blue Chip Fund (G) 12.5% MH
Mirae Emerging Bluechip Fund (G) 23.4% MH
ICICI Prudential Value Discovery Fund (G) 17.2% MH
Axis Long Term Equity Fund (G) 18.8% MH
SBI Premier Liquid Fund - Regular Plan (G) 9% L

All about Systematic Investment Plans

You would have heard a lot about Mutual Funds and SIPs but do you know what exactly are they? Do you know the benefits of SIP? Do you know which some of the best Investment SIPs are? Well, you will find the answer to all your questions over here. So read on for all information about Systematic Investment Plans.

What is SIP (Systematic Investment Plan)?

SIP is like an EMI but it is known to be a good EMI. In a way, it can be said that SIP is an investment vehicle which is similar to recurring deposit. The difference is that the returns in SIP are usually higher than the traditional recurring funds. This is quite a dynamic investment plan and you can invest in different types of mutual funds with help of Systematic Investment Plans. This was the basic information about the SIP and let us now read more about it.

What are the Benefits of SIP?

There are several benefits of SIP and some of them are listed below

  • Power of Compounding – When you invest money through SIP, you experience the true power of compounding. Over the years, your investment multiplies several folds as you receive the investment growth not on the principal amount but also on the interest or the capital gain factor of the mutual funds.
  • Discipline in Investment – When you decide to invest manually, you might not be very consistent and you might end up missing out on monthly investments. With SIP, the amount automatically gets deducted from your bank account on a periodic basis and hence you do not have to worry about investing manually.
  • Cost Average – While you invest via SIP, the market condition can vary on daily basis and hence you receive the benefit of the dynamic market conditions. In addition to this, investing via SIP also nullifies the volatility risk because of cost average. In simple terms, SIP eliminates your worry about the market volatility.
  • Possible to Pause – While you invest through the Recurring deposit, it might not be possible to pause the investment for a few months when you are in need of cash. With SIP, it is possible to pause the periodic investment whenever you want and this can help you in meeting your expenses in the months when you need more of cash. This can help you in case of emergency as well.
  • Easy to Invest and Grow– It is also very easy to invest via SIP and one of the reasons for this is the fact that you can start SIP with as low as Rs 500. The maximum amount can vary as per your preference and you can also choose a pool of mutual funds to invest in via SIP.
  • Makes it Easy to Achieve Goal – Investing via SIP would also make it easy for you to achieve the goal. The main reason behind this is the disciplined approach towards investment and the higher returns in long term. It is true that the investments in mutual funds are exposed to market risk but this risk balances out in long term.

How Does SIP Work?

So you have been through the benefits of SIP and now you must be wondering that how does the concept of SIP works. Here is the answer to your question. You can use your investment platform to choose a Mutual Fund that you want to invest in and you can then proceed to initiate a SIP. You can then enter the amount that you would like to invest on a periodic basis. You will be able to choose a date of the month on which you want the money to be deducted from your account. Once the SIP is set up, the payment will be auto-debited from your account and it will be allocated towards the mutual fund that you choose. The allocation would be based on the current NAV of the fund and this would be an iterative process on monthly basis. It is also possible for you to change the interval and choose Weekly, Quarterly or any other time interval as per your convenience.

Why should you consider investing in a SIP?

You have already been through the benefits of SIP and if that was not enough to convince you to invest in a SIP then here are some more reason why you should be investing in a SIP.

  • No Stock Market Knowledge Required – Well there are only a few people who could actually make good profits from the stock market in long run and if you do not have knowledge of Stock Markets then SIP is probably one of the best investment vehicles for you. Your money is being managed by the experienced Financial Experts which certainly reduces the risk of loss.
  • Higher Returns on Investment – This point is one of the most important points to be noted. While you invest in the Recurring Deposit or the Fixed Deposit, you might not receive a very high return but while you invest in SIP, the return can be very much higher. In some of the cases, the difference can easily be 10%. This reason alone is enough for investments through SIP.
  • Easy to Redeem Funds – Now you might wonder that it would be difficult to redeem your investments but the fact is that it is very easy to redeem your investments if you invest in mutual funds via SIP. It is just a matter of a few clicks and your money will be transferred to your bank account. It should be noted that there could be a lock-in period as well and that depends on the fund you invest in.
  • Auto Wealth Creation – When you initiate a SIP, you simply automate the wealth creation. You do not have to worry about the fund allocation and other such details as the experts are doing that for you. In this way, your money is working for you and you are generating passive income for yourself.
  • Better Future Planning – SIP also helps in better future planning as you can invest a SIP with a future goal in mind. This investment can help you during child’s education, child’s marriage, and purchase of a home or even retirement. The horizon of investment can vary as per your needs.

How much do you need to start a SIP?

This is something that every investor asks when they start with SIP. The good part about SIP is that you can start a SIP with as low as Rs 500. However, for some of the SIP, the starting amount is Rs 1000 so the starting amount depends on the fund house and the type of fund but as per an observation, SIP is most of the funds available in the market can be started with Rs 500 to Rs 1000. You can increase the SIP amount as per your requirement and you can also stop the SIP whenever you want.

SIP or Lumpsum Investment: How should I Invest?

Again an important question wherein the people can get confused while making a choice. Lumpsum investment is when you make the investment at one go and the disadvantage of making a Lumpsum investment is that you would need to time the market and make an investment when the market is at its lowest point. If you make a lumpsum investment during the highs then you can lose the value of your funds in short term. In addition to this, you will not be able to get the benefit of cost average while making the Lumpsum investment. Considering all the points in mind, it is always better to choose SIP as the preferred mode of investment but if at end of the year, you have some extra cash then you can certainly invest that extra cash through Lumpsum investment. For most of the mutual funds, the minimum required Lumpsum amount will be higher than the amount required to SIP so you would also need to consider this factor while you are making the Lumpsum investment.

How to Choose a SIP

There are many factors that you must consider while choosing the SIP and we have listed some of the factors below

  • Risk Appetite – This is the most important factor that you must consider before investing in a fund. If you have a low-risk appetite then you must invest in debt oriented funds whereas if you have an average risk appetite then you can also opt for a balanced fund. In case you are a risk taker, you can simply go ahead and invest in equity-based funds.
  • Lock-in Period – Some of the funds also comes with the lock-in period which means that you would not be able to withdraw funds before a specific period of time. If you need cash soon at any point of time in future then you must not invest in tax-saving funds as they come with a lock-in period of 3 years. In such a scenario you must choose a liquid fund.
  • Age of Fund – The age of fund is another factor that you must consider while choosing the SIP. The fund should not be a new one as in such a case, it would be difficult for you to analyze the performance of the fund.
  • 1 Year Return and 3 Year Return – Do consider the past returns of the fund as this will help you in understanding the returns that you will be able to reap from the fund. You can also choose to analyze the 5 year return of the fund.
  • The reputation of Fund House – Reputation of fund house is another important factor and always choose the fund house with the good reputation.
  • Investment Horizon and Goal – If you have a short investment horizon then you must choose the funds which offer you the flexibility to withdraw funds and the schemes should have a low-risk profile. If you are planning for retirement or tax saving then you need to choose funds accordingly.
  • Expense Ratio and AUM – The fund should have a lower expense ratio and high Asset Under Management. Do not opt for funds with high expense ratio as this could lower your returns.

Tax Benefits of Investing in SIP

Before you invest in SIP, you must know that not all SIPs would offer you a tax benefit. There is specific equity-linked mutual funds which offer you a tax benefit. You can claim the tax deduction up to Rs 1.5 Lakhs invested in such a scheme but be aware that the lock-in period of such schemes is 3 years and hence you will not be able to withdraw your money till 3 years from the investment date.

How to Invest in SIP?

There are many different ways to invest in SIP and some of them are mentioned below

  • Digital Portals – Today, there are many digital portals available on the web which can help you in investing via SIP. These portals do not charge any commission from you and hence you get the complete value for the amount that you invested. These platforms can also produce reports as per your requirements and they can also recommend you funds as per your goals. A lot of people choose these digital portals today as it offers them a high control on their funds.
  • Banks – Second best option to invest in Mutual Funds through SIP is via Banks. Most of the banks offer investment solutions and you can go ahead and speak to your relationship manager to start investing through SIP. Some of the banks do charge brokerage for the investments. Moreover, the banks may not have all the funds house listed with them.
  • Traditional Brokers – Third option available to you is through the traditional brokers but they always have a high commission charge which would lower your returns.

Choose the way you want to invest and open an account with that broker. For example, you want to invest through the digital portal then choose a digital portal and open an account there. You would require submitting KYC documents to enable your account. Once that is done, you just have to choose the fund and the investment amount. The SIP will now be set-up and you would not require doing anything else.

FAQ (Frequently Asked Question)

Here is the answer to some of the FAQs in relation to SIP

  • Can I Stop my SIP Mid Way?
    • Yes, You can go ahead and stop the SIP whenever you want however some funds may require you to continue the SIP for at least 6 months
  • How long does it take to redeem money?
    • Depending on the fund, it usually takes 1 or two working days for you to redeem the money. Once you place the order to redeem the funds, the calculations are made on the closing NAV of the same day if you redeem the funds before the cut-off time. The money is then credited to your bank account.
  • What is SIP with Insurance?
    • There some funds which are offering life cover at no extra cost and these funds are gaining a lot of popularity. You can choose these funds if you would like to get a life cover without investing money in term insurance. It should be noted that there are usually some terms and conditions linked to the SIP which comes with the insurance.
  • Can I switch my funds in the middle of the year?
    • Yes, you can switch funds in the middle of the year and many portals offer facilities to transfer the funds in a systematic way. This is certainly an add-on and you can choose the new fund from the same fund house.
  • Can I change SIP date?
    • It is also possible for you to change the SIP date but the same needs to be done at least 5 days before the SIP date. Once the date is changed, the deductions would be made as per the new SIP date.
  • What if I run into losses?
    • You might run into losses in short-term depending on the market condition but do not panic. This will balance out in long term and you will receive good returns in long term.

Can a SIP be customized?

It is certainly possible to customize the SIP and some of the ways to customize the SIP is to change the amount as and when required. You can also alter the frequency of SIP easily but this was all about the basic customization. There is also an option for advanced customization and apart from Regular SIP you can also choose these options

  • Flexi SIP – So Flexi SIP allows you to have more control over the investments as you can choose the SIP amount on monthly basis. You can set a minimum investment amount and the maximum investment amount. A week before the SIP date, you receive the notification in which you can alter the investment amount. If you do not alter the amount then the pre-selected minimum amount is debited from your account for SIP.
  • Step up SIP – In Step up SIP, the monthly investment amount is increased by a pre-defined percentage on the semi-annual or annual basis. This increased percentage can be chosen by the investor and he can also choose the frequency at which he would like to step-up the SIP. This type of SIP helps in reaching the goal at a faster pace.
  • Value Averaging SIP – As you know that the NAV of the funds vary with the market index so the value average SIP takes advantage of this and triggers a notification during a market crash or during lower index value. In this type of SIP, you can choose to increase the SIP amount in that specific case when the market index has experienced a sharp fall.
  • Alert SIP – In Alert SIP, the money doesn’t get debited from your account directly but a transaction is created on your investment platform. Once that is done, you need to login to your investment platform and make the payment manually.

SIP Calculator

SIP calculators enable you to calculate the future value of the cash flows during the tenure of the SIP. There are many reliable calculators available and they function by simply calculating the future value of the annuity with a fixed given average return for the overall investment period.

These SIP calculators can help you in forecasting the capital gains against the invested amount which can further help you in future planning. This way, you can do a reverse calculation and also find out the amount of SIP that you must be chosen for yourself to reach a goal.

Simple Step to using a SIP Calculator

Here is how you can use this SIP Calculator

  • You need to plug in the value of the monthly investment amount in Rs in the space provided.
  • In the next step, enter the investment period. This is basically your investment horizon and this value needs to be entered in the number of year format.
  • Once this is done, you can enter the expected annual returns. The safe value to assume there would be three years return or five-year return. Once the values are plugged in, you can simply click on Calculate Button.
  • The SIP calculator will now show you the amount you invested versus the capital gain and the final investment value. This would also show you the value of the investment across a different period of time.

Top 10 SIP Investment Funds and their performance

Are you still confused amount the right Investment Fund? Well, here are the top 10 SIP Investment Funds along with their performance.

Scheme Name 1 Year Return 3 Years Return
Mirae Asset Emerging Bluechip Fund - Direct Plan (G) 13.52% 18.31%
L&T Midcap Fund - Direct Plan (G) 20.49% 18.28%
SBI Small and Medium Cap Fund Direct Plan (G) 38.17% 26.04%
Reliance Small Cap Fund - Direct Plan (G) 28.09% 23.27%
Edelweiss Mid Cap - Direct Plan (G) 25.25% 14.14%
L&T Infrastructure - Direct Plan (G) 21.86% 16.92%
Motilal Oswal Long Term Equity - Direct Plan (G) 20.98 19.44
SBI Magnum Children’s Benefit - Direct Plan (G) 17.61% 15.46%
Principal Balanced - Direct Plan (G) 19.72% 14.79%
L&T Emerging Business - Direct Plan (G) 36.78% 24.50%
These were the top 10 mutual funds and you can invest in them as per your risk appetite and your requirements. Remember that the high-risk funds would always have a high yield when compared with the balanced or the debt-oriented funds. In addition to this, the article has all the information you would ever need to learn about SIP.