What is SIP Calculator?

SIP calculator is a simulation, which allows you to estimate the return on mutual fund investments made through SIP. Investing through SIPs in mutual funds is a popular investment option for millennials. SIP calculators are designed to give potential investors a heads up on their mutual fund investments. However, the actual return from the mutual fund scheme varies depending on several factors. The SIP calculator does not account for the exit load and expense ratio (if any). It is an online tool to calculate the SIP amount to achieve your financial goals, based on an expected annual return.

How does SIP Calculator work?

A SIP plan calculator works by the values entered by the users.

You must enter the amount of investment, frequency of investment, duration of investment, and the expected returns. The SIP return calculator is designed based on the compound interest formula. The compounded interest powers the mutual fund returns. ClearTax SIP Calculator shows the comparison of the returns offered by mutual funds with fixed deposits.

You can understand the workings of a SIP calculator with this formula.

FV = P [ (1+i)^n-1 ] * (1+i)/i
FV
Future value or the amount you get at maturity.
P
Amount you invest through SIP
i
Compounded rate of return
n
Investment duration in months
r
Expected rate of return
Take an example where you invest Rs 2,000 per month for a tenure of 24 months.
You expect a 12% annual rate of return (r).
You have i = r/100/12 or 0.01.
FV = 2000 * [(1+0.01) ^24 - 1] * (1+0.01)/0.01
You get Rs 54,486 at maturity.

 

SIP Calculator




                    

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