SIP is the easiest way to invest in mutual funds. It lets you invest a fixed small amount periodically, to help you reach your investment objective. But how will you select and start the right SIP plan for your investment? A SIP calculator can help in the following ways.
If you’re planning to start investing in mutual funds, SIP is the easiest way to begin. With investment starting with as little as Rs. 500 per month, SIP is one of the most affordable ways to start your investment journey as early in life as possible.
But with so many mutual fund schemes now available, how will you select one for your SIP? How will you fix the SIP amount and duration? Fortunately, there are now SIP calculators that can help. These are the five essential ways in which a SIP calculator can help you select and start investing in SIP-
- Select the Right Type of Mutual Fund: Mutual fund schemes are of many different types. There are equity funds, debt funds, balanced funds, ELSS funds, and diversified funds to name a few. To select the right mutual fund scheme for your SIP, you first need to choose the type of fund that best suits your investment style and objective.
For instance, equity funds are generally recommended for long-term wealth creation but are highly volatile. You can pick a few different types of funds and enter their past returns in the calculator to get an idea about what a particular fund could generate in the future.
- Identify the Best Mutual Fund Scheme for You: Once you know the type of mutual fund you should invest in; the next step is to select a scheme. Most AMCs have multiple schemes of many different types of mutual funds. You can check the AMC’s website to know the past returns of the schemes it offers.
While the past returns are in no way related to the future performance of the scheme, it still makes it easier for investors to know the type of scheme they should select.
- Fix the SIP Amount: To ensure that you’re able to reach your objective, it is vital to choose the SIP amount very carefully. SIP calculators require you to enter the SIP amount, SIP duration and return expected for calculating the maturity amount.
You can keep adjusting the SIP amount until the maturity amount reaches your final investment goal.
- Select the SIP Duration: Just like the SIP amount, the SIP duration too is of great importance. With the help of the returns calculator, you can enter the term for which you’d like to continue your SIP.
So, for instance, if you cannot invest more than Rs. 5,000 a month but this amount is not able to generate the required returns; you can increase the SIP duration to achieve your objective. The calculator makes it easier for investors to know the period for which they should invest.
- Lets You Compare Multiple Schemes: What if you’re finding it difficult to select one from 2 or 3 of the top performing schemes? Use a SIP return calculatorto make the selection easier. Check the past performance of the schemes you’ve shortlisted and enter their returns in the expected returns column of the calculator.
Keep the SIP amount and duration same for all the schemes. Calculate the maturity amount and pick the one that offers the highest returns.
Selecting the right SIP for your investment gets considerably easier with the help of a returns calculator. Now that you know the different ways that the calculator can help, search for one online to select the best mutual fund scheme and start investing.