Systematic investment plan (SIP) offers a disciplined approach to investing and helps investors to channelise their savings into mutual funds regularly. However, investing without proper research, risk assessment, comparison, and calculation can lead to missed opportunities and financial burden. A lack of proper planning can turn your SIP investments into a financial liability rather than offering any benefits.

Imagine investing in a mutual fund via an SIP without using a calculator. You select a scheme, choose an investment amount, and after a few months, you realise that your SIP investments are causing you financial distress. This could have been avoided if you had used an SIP calculator before making the investment.

That is not all! There are other ways an SIP calculator helps you make informed investment decisions. From selecting the best scheme to setting an appropriate investment amount, here is how an SIP calculator helps you plan your portfolio strategically and avoid costly mistakes.

  • You can invest the right amount

An SIP mutual fund calculator uses four simple outputs- investment amount, investment period, expected rate of return, and frequency of contribution. Once the inputs are entered, the SIP calculator generates the future value of the investment.

The results can help you figure out the right amount to invest within your budget and understand the effect of different investment amounts. This way, you can analyse the growth of your investments more accurately and create a disciplined plan.

  • Compare different mutual funds and their returns

Rather than making guesses, SIP calculator helps you practically experiment with different variables like investment amount, interest rates, frequency and see how these factors impact the final amount you will receive at maturity.

Let’s say you want to invest Rs. 20,000 per month in a mutual fund through SIP. You can explore different possibilities with an SIP calculator. You can check what happens if you invest the same amount for 5 years with an expected return of 12% and then compare it to investing for 10 years with a return of 10%. The calculator will provide you with the respective maturity amounts, which can help you assess which mutual fund investment plans or schemes suit your financial goals better.

  • You can save for different goals

As an investor, you begin your investment journey with specific goals in mind. These goals can include funding higher education, buying a house, going on a world tour, or planning for retirement. With the help of an SIP calculator, you can align your investment strategies to these objectives and allocate your funds strategically.

Let’s assume you have a world tour plan after 20 years and want to accumulate 30 lakhs for this goal. Using an SIP calculator, you can input the desired amount, the investment duration, and the current return rate being offered by different SIP mutual funds. The tool will then help you determine how much you need to invest consistently to achieve your target of 30 lakhs in 20 years. This information acts as a clear roadmap to help you plan your investments efficiently.

To wrap up

SIP calculators offer multiple benefits; they are free, eliminate guesswork, estimate your SIP maturity with accuracy, set realistic goals, and help you make informed investment decisions. Even most mutual fund experts recommend using SIP calculators to create a personalised investment strategy to match your goals, risk tolerance, timeline, and budget.

At the same time, make sure to input accurate data into the calculator to get precise results and avoid mistakes that could cost you valuable investment opportunities.