Systematic Investment Plan (SIP). SIP is a mechanism of payment of investment in mutual funds by investors. A systematic Investment Plan is like a recurring deposit, where the investors can finalize the amount and date on which their account should be debited. SIP offers an option of monthly and quarterly payment modes.
In order to finalize the payment mode, the investor just needs to choose the desired mode of payment along with an application form and submit it to the mutual fund.
Investors can make payments both online and offline. SIP investment in mutual funds prevents the downfall of equity investment and provides an opportunity to enjoy high returns in the long run. With the help of the SIP calculator, investors can analyze how small investments made in regular intervals can provide many profitable returns over a long period of time.
Features of the SIP Calculator
For the knowledge of our customers further in this article, we have briefly discussed some of the salient features and benefits of using an SIP calculator.
- With the help of a SIP calculator, investors can invest a fixed sum of money in a specific mutual fund and gain returns for investment.
- According to the ongoing Net Asset Value the investors are allocated a certain number of units in accordance.
- The SIP calculator provides you with a clear figure of how much money you should invest in the market in order to gain profitable returns
Benefits of Using a SIP Calculator
1. Disciplined Investors
As decided by the investors, the investors can transfer a fixed amount on a monthly and quarterly basis to the mutual fund account from the bank account. The SIP calculator provides the most beneficial way to invest for small investors as one can start investing with the lowest amount of Rs100 per month or quarterly. Thus it helps the investors to create a corpus over a long period of time. A monthly SIP investment of Rs500 at an interest rate of 9% can grow up to Rs3.35 lakh in 10 years. For investors, it is always advisable to invest a small amount monthly rather than investing a large lump-sum amount in one go.
2. Rupee Cost Averaging
This is one of the simplest and most advantageous features of SIP. This formula is best for investing in equities. Rupee cost averaging works in such a way in which an equal amount is invested in the fund at regular intervals of time so that the investors can buy more units at lower prices. Thus, it reduces the average cost per unit over a period of time. Moreover, rupee cost averaging costs smoothen the markets up and down and reduces the risk of market violation.
3. Provides a Flexible Mode of Investment
One of the major reasons to invest in SIP is that it provides a highly flexible mode of investment. Thus, it is profitable for all kinds of investors. SIP provides leniency to stop investing in plans whenever they want. Moreover, the investors are not charged with any penalty irrespective of whether they want to continue investing in mutual funds or stop the SIP.
Conclusion
As compared to the lump-sum investment SIP is more beneficial as the amount is invested on a monthly basis, so there is very less or no impact of the market violation. Moreover, SIP funds provide flexibility to the investors as one can create, update or cancel SIP anytime. By comparing the changing SIP rates you can choose the most beneficial scheme according to your own choice. The correct way to calculate returns from a SIP is always better than a lump–sum investment.
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