SIP Calculator

Just select the goal amount you wish to achieve in the SIP calculator, select the assumed annual rate of returns and the SIP calculator will tell you the monthly SIP amount that you need to invest for different years (5 years, 10 years, etc.); based on the principle of compounding. This lets you make informed investment decisions for the future.

Apart from a disciplined and convenient savings approach, some of the benefits of investing through a SIP include-

• Benefiting from Risk: Investing in stocks comes with the potential risk for volatility. Rupee-cost averaging can help reduce risk by allowing you to buy more units when markets are low and buy fewer units when markets are climbing. So, you can benefit from market volatility.
• Increased Savings: The amount of money you invest can get compounded over a period and might help you accumulate a corpus over a long time.
• Flexibility: You can decide how much to invest. You can start with as small as Rs 100/**-.
• Avoids personal bias: SIP can help you avoid getting distracted by what is happening in the markets. Regardless of the market levels, your SIP instalment will get deducted, thus saving you from any distraction and miscalculation while investing. One might overinvest or underinvest in a given market situation due his personal bias.
• Discipline: SIP is one of the most disciplined ways to invest your money. Financial discipline is one of the most crucial aspects of creating wealth. By fixing the frequency of your investments and automating them through a SIP works like an auto pilot in your investment journey. You will never miss an investment schedule with SIP unless you decide to stop the SIP.

With regular investing and the principle of the power of compounding, you might be able to accumulate a corpus over the long term. In fact, SIP can be helpful over longer periods. As seen in the illustration above, if you have a long period for the investment of 30 years, you aim to create a corpus of Rs 1 Crore by just investing Rs. 2,861 per month. However, if you have a very short period of say 5 years, reaching the same amount of Rs. 1 Crore will require you to invest Rs. 1,22,444 per month.

You can start a SIP with as low as Rs.100 or Rs.500 (depending on the limit set by a mutual fund house) and increase your contributions over time.

However, various fund houses might have various minimum investment amounts, which should be checked before investing.

SIPs offer choices in terms of frequency of contribution. Apart from monthly SIP, there are other options like Daily and Weekly SIP frequency. One can choose the right frequency of SIP contribution as per his liking and planning.

A general Systematic Investment Plan offers you the option to invest a fixed amount monthly. However, there are facilities by certain fund houses that offer an option to increase your SIP contribution on a periodic basis. Like your income increases every year, you could opt for a Step-up SIP option on an annual frequency. For example, you can start a SIP of 5000 with a Step up of Rs 1,000 every year. In such case, for the initial 12 months, your SIP will be Rs 5,000, and subsequently, from the 13th to 24th month, the SIP amount will be ‘step up’ to Rs 6,000 (increased by Rs 1,000).

This allows you to grow your contribution every year and can help you reach your goal faster.

There are a lot of benefits of investing via a SIP:

I. Convenience: You can authorize an ECS mandate from your bank account to debit the amount towards the payment of the SIP investment. You don’t have to write multiple cheques.

II. No need to time the market: Since the investment is made over a period of time, a SIP helps you avoid the need to time the market. Your SIP instalment gets deducted irrespective of the market situation.

III. Minimum Investments: Depending upon the fund house, you can start with amounts as low as Rs.500** and gradually increase according to your needs. However, various fund houses might have various minimum investment amounts; one needs to, therefore, check before investing.

SIP is an approach in which investors put a fixed amount of money into an investment at regular intervals, irrespective of the market conditions. As a result, more units are bought when markets are trading lower, and fewer units are bought when markets are trading higher. It can be an effective way to reduce volatility risk.

Let us understand this by an example.

In the above example, if you invest a fixed amount of Rs. 5000 on a monthly frequency, over a span of 5 months (from June to October) you would have bought a total of 255 units of the fund at a lower average cost of Rs. 98.2 as compared to the initial cost of Rs. 100 per unit. The NAV of a mutual fund may fluctuate from time to time, but since there is a discipline of investing a fixed amount monthly, you end up buying more units when the NAV is down (as in the month of August and September in this example). On the other hand, you buy fewer units when the NAV is high, i.e., it is more expensive to the buy same unit of the mutual fund (as in the month of June, July, and October)

Some fund houses offer SIP options in debt or fixed income schemes also. One can invest in a debt scheme on a chosen frequency just like an equity SIP.

There is no simple answer or formula for this. Investment is a personal choice, and your investment decisions should be based on your goals, your life stage, and your style of investing. Well-informed investors can plan their own investments. However, others can take the help of a well-versed financial advisor to decide on specifics. It may be appropriate to have a SIP linked to specific goals.