SIP is a great way to invest in mutual funds. But as with any investment, it is important to know the type of returns the investment would generate. There are now mutual fund calculators that can make this job easier for you. Let us have a look at what these calculators are and how can they help you.
Thanks to the bull run of the stock market in the last few years, a mutual fund investment has gained major popularity in the country. As compared to lump sum investments, increasing number of investors prefer investing in mutual funds of their choice through SIP (Systematic Investment Plan).
But while it is known that mutual funds can generate massive returns, it is important for investors to know the actual returns that can be generated with the amount they are investing and for the tenure they want to invest. And a simple solution to calculate the returns is using an MF calculator.
What Is A Mutual Fund Calculator?
Small smart investments at regular intervals can result in massive returns due to the power of compounding over a period. This is the main idea behind SIP investments in mutual funds. With SIP, you can invest as little as Rs. 1,000 in a mutual fund scheme every month.
But while investing, every investor wants to know the type of returns that would be generated if they continue investing every month. This is where a mutual fund calculator gets into the picture. The calculator provides an approximate of the total returns that would be generated if you invest a fixed amount in a mutual fund scheme for several years.
For instance, if you want to invest Rs. 2,000 every month in a scheme for five years, the calculator can be used to calculate the total returns on your investment when the scheme delivers 9%-15% returns every year. Similarly, you can adjust your SIP amount, investment duration and returns to get a realistic idea of your investment. However, it is important to know that the returns are approximate values calculated on the basis of the past performance of the fund.
How Is The Calculation Done?
The calculator uses S= R [〖(1+i)〗^n – 1/ i] x (1+i) formula for calculating the approximate returns on the investment. Here, ‘S’ is the total returns on the investment, ‘R’ is your SIP amount, ‘i’ is the returns assumed by you and ‘n’ is the total number of months.
To calculate the approximate returns on the investment, it is assumed that you invest a fixed amount in a scheme every month for the selected period and every investment earns compound interest which is calculated for the total number of years for which you invest.
Investing in mutual funds through SIP is an excellent way to keep investing smaller amounts every month and let the power of compounding deliver massive returns. Now with the help of this calculator, you can get instant details about what your total returns would be at the end of the investment tenure.