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Aditya Birla Sun Life AMC Limited

Aditya Birla Sun Life AMC Limited

    • Understanding SIP Returns: A Beginner’s Guide to Using an SIP Calculator

    Apr 30, 2025
    5 Min
    0 Rating

    “What gets measured gets managed.” This old saying is especially true when it comes to your investments. Tracking your investment returns is just as important as investing. You should always know what money works best for you. Systematic investment plans (SIPs) are a way to invest in mutual funds. However, due to its nature, the calculation of SIP investments for beginners can be tricky. With a user-friendly tool, like the SIP calculator, you can simplify this complex task. In this blog, you will learn everything about SIP calculators, how they work, and why you should be using one.

    What is an SIP Calculator?

    The SIP calculator is a simple, helpful tool designed for investors. It helps in planning and scheduling an individual's investments. It also enables them to estimate the returns that will be generated from their SIP investments in mutual funds. If you use an SIP calculator, you will be able to determine the amount that will be accumulated at the end of your investment tenure.

    The SIP calculator is a popular tool as it helps in easy financial planning. Remember that you won’t be getting the exact estimate as calculated because of varying market conditions, but it gives you a fair idea.

    Features of the SIP Calculator

    SIP calculator offers the following features:

    Feature

    Description

    Easy to Use

    Clean, simple interface that anyone can navigate — no expert skills needed.

    Quick Results

    Get instant estimates with just a few clicks; no math is required.

    Reliable Estimates

    Offers close-to-accurate projections based on your inputs.

    Supports All Fund Types

    Works for equity, debt, hybrid, and other mutual fund categories.

    Helps in Planning

    Assists in setting realistic investment goals and timelines.

    No Cost Involved

    Free to use, anytime and anywhere online.

    Visual Representation

    Many calculators provide graphs and charts for better understanding.

    Comparison Friendly

    Let's you compare different SIP amounts or durations easily.

    Saves Time

    Cuts out manual calculations and simplifies decision-making.

    Great for Beginners

    Especially helpful for new investors to understand the SIP potential.

    How Does a SIP Calculator Function?

    A SIP calculator functions on the following formula:

    FV= P [(1+i)^n-1]*(1+i)/i

    Where:

    • FV stands for future value

    • P stands for the regular investment amount

    • i stands for rate of return

    • n stands for the number of instalments

    Let us understand this through an example:
    For instance, if you want to invest ₹8000 monthly, an annual return rate of 10%, which means a monthly return rate of 0.10÷12 equal 0.0083 approx and an investment period of 10 years, that is 120 months, then:

    Details

    Values

    Monthly Investment (SIP)

    ₹8,000

    Investment Duration

    10 years (120 months)

    Expected Annual Return

    10%

    Monthly Return Rate (r)

    0.0083 (10% ÷ 12)

    Formula Used

    FV = P × [ (1 + r)^n – 1 ] × (1 + r) / r

    Final Value (FV)

    ₹16,53,748.64

    Approximate Returns

    ₹7,93,748.64 (on ₹9,60,000 invested)

    How to use a SIP Calculator?

    Here is a table depicting the steps you need to follow to use a SIP calculator online:

    Step

    What to Do

    Purpose

    1

    Enter the investment amount

    This is how much you plan to invest regularly

    2

    Input the expected rate of return

    Estimate how much return you think you’ll earn

    3

    Choose the investment duration

    Set the period you want to stay invested

    4

    Click on the ‘Calculate’ button

    Get instant results showing your estimated returns

    Summing Up

    There is a lot more to SIP calculators than just convenience. SIP calculator functions as a friend in need when you need someone to help you plan a journey of financial growth. Tools like SIP calculators have made investing extremely straightforward. A lot of investors are inclined to use an SIP calculator for effective financial planning. With a SIP calculator, you can save time, manage risks effectively and focus on strategies that align with your financial goals. So now that you know all the benefits the SIP calculator has to offer, why wait? Start using SIP calculators now and eliminate the guesswork from your investment decisions.

    Returns are neither assured nor guaranteed. There is no warranty about the accuracy of the calculator. Please consult your financial advisors before taking any investment related decisions.

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

    The minimum period for any SIP depends on the mutual fund scheme you choose. However, a common tenure in all mutual fund schemes is about six months.

    Yes, SIPs are one of the safest methods to invest in mutual funds. However, you should always keep in mind that in some months, the price for your SIP will be high, but sometimes it can be low as well.

    Absolutely. SIPs aren’t fixed deposits or recurring deposits, so they can be stopped at any time you want.