SIP Calculator

What is Systematic Investment Plan (SIP)?

In a Systematic Investment Plan (SIP), you need to contribute a fixed sum monthly towards your investment. This steady approach leverages the power of compounding, which helps grow your money over time. SIPs balance the cost of investment, making them a stable way to build wealth. To estimate the future value of such investments, there are SIP calculators. Read on to learn more about them.

What is an SIP calculator?

SIP calculators are a valuable tool that you can access online to calculate the returns on your SIP investment. The working of the tool depends on three main factors. This includes the monthly investment amount, the duration of investment and the current interest rate. It gives you a clear idea of how much your investments could grow over time.

How does an SIP calculator work?

SIP calculators online eliminate the risk of human errors and allow you to calculate the returns easily. Understanding the process of how they work can give you better insight into how your money grows over time. Here's the detailed flow of the process:

FV = P X {(1+r) n - 1/r} X (1+r)
FV = Future value of the investment
P = Monthly SIP amount
r = Monthly rate of return (Annual rate divided by 12)
n = Total number of months of investment

Example: Suppose you plan to invest ₹5,000 per month in a mutual fund through an SIP with an expected annual return of 12% for 10 years. The SIP calculator will calculate the future value of this investment using the formula:

P = ₹5,000
r = 12% p.a. (0.01 in decimal form)
n = 10 years x 12 months = 120 months

Steps:

1. Calculate (1+r): 1+0.01 = 1.01
2. Evaluate (1+r)n: 1.01^120 = 3.30039
3. Subtract 1 from the result = 2.30039
4. Divide it by r = 2.30039/0.01 = 230.039
5. Multiply the result by (1+r) = 230.039 x 1.01 = 232.339
6. Finally, multiply the result by the principal = 5,000 X 232.339 = ₹11,61,695

How to use Kotak811 SIP calculator? A step-by-step guide

1. Go to Kotak811 SIP calculator online

With just a few clicks, you can calculate the returns on your investment with the Kotak811 SIP calculator online. Compare different plans and choose the best one that aligns with your financial requirements.

2. Enter the monthly investment amount

Input the amount you plan to invest regularly. This could be any amount, such as ₹1,000, ₹5,000 or ₹10,000.

3. Select the investment duration

Choose the period for which you intend to continue your SIP. For example, you might choose 5 years, 10 years, or even longer.

4. Input the expected rate of return

Enter the annual expected rate of return for the mutual fund or investment option you are considering. This rate is usually expressed as a percentage (e.g., 10%, 12%).

5. Calculate the future value

After entering the necessary details, click the 'Calculate' button. The SIP calculator will process the inputs using the compound interest formula and display the future value of your investment.

6. Review the results

The calculator will show you:

• The total amount invested over the period.
• The estimated returns earned on the investment.
• The future value of the investment (total amount accumulated).

7. Adjust and compare

You can adjust the monthly investment amount, duration, or expected return to see how changes affect future value. This will help you compare different scenarios and choose the best investment plan for your financial goals.

What are the benefits of using an SIP calculator?

• An SIP calculator helps you align your investments with your financial goals by estimating future returns.
• It shows how your money can grow over time through the power of compound interest.
• SIP plan calculators make it easy to compare different scenarios and understand their impact on your returns.
• They provide quick and accurate calculations, eliminating the need for manual calculations.
• SIP calculators motivate regular contributions by showing the potential growth of your investments over time.

FAQs

1. Is SIP tax free?

On its own, SIP isn't tax-free. However, the investments made under the Equity Linked Saving Scheme (ELSS) qualify for tax deductions. Under Section 80C of the Income Tax Act, you can claim deductions up to ₹1.5 lakh per financial year.

2. Can you modify or change your SIP amount?

Yes, you can change your SIP amount with 'Modify' feature. However, you can only make edits after you have completed about 6 instalments.

3. What are the different kinds of SIPs?

The following are the different types of SIP investments you can consider:

• Regular SIP: It is the most common type, where a fixed amount is invested at regular intervals (monthly, quarterly).
• Flexible SIP: This SIP allows you to increase, decrease and even pause contributions depending on your cash flow.
• Top-up SIP: Here, you can increase your SIP amount at pre-defined intervals, such as annually.
• Trigger SIP: This allows investments based on specific market conditions or events, like when a stock index reaches a certain level.
• Perpetual SIP: Unlike regular SIPs, this has no fixed tenure and continues until you choose to stop it.