SIP Calculation Mathematical Formula
Future Value = monthly investment x ((1 + monthly rate)^months - 1) / monthly rate
What is SIP?
Abbreviation SIP stands for Systematic Investment plan. Basically SIP is the process by which you can save and invest a certain amount monthly in various schemes to get growth in your money. So in easy terms, by using SIP we invest in mutual funds on weekly, monthly or quaterly basis. In this process when you keep SIP for long time then you get a good growth of your money.
Is SIP a good investment option?
SIP is indeed a good investment option available as of now. Now rate of return on fixed deposit is just marginal which was thought to be a great option of investment in old times. By using SIP you do not have to invest in bulk which you need to do in fixed deposit. So people invest in SIP. In fixed deposit the average max rate of interest given by bank is upto 6.4 % annual while SIP on an average gives average 12% growth with investment period of around five years compounded interest. Beacuse of this investment in SIP is considered good option for investment.
Is SIP risk free?
SIP is not totally risk free as it works on mutual funds. And you can see in every ad of mutual funds that Mutual Funds are subject to market risks. But losses are less over here as only a quantum of money is impacted by any negative performance day. Most of the SIP schemes fund great organisations so the chances of getting fail are lesser. We should be wise enough while choosing the SIP scheme. If we have been wise there then we will definitely grow a huge amount.
What is SIP calculator?
SIP Calculator is an application which based on your monthly SIP amount, average rate of return and based on duration of your interest find the expected approximate maturity amount of SIP. If you are able to judge your rate of return accurately then you will definitely be able to get that accurate maturity amount. If you are on this page then you would have already seen how an SIP calculator works.
What is the average rate of return on SIP?
Average rate of return on SIP investment vary a lot based on mutual fund that you have invested. Small cap mutual fund SIP can give zero or negative return on one side whereas same mutual fund can give above 20% rate of return. So rate of return can vary based on market conditions. To give near to values I can say based on my experience, average rate of return 12-15 % can be earned from large cap equity funds. You can expect 14 - 18 % average rate of return from a mid-cap equity. In case of small cap equities there is high risk and high returns. An average small cap gives you around 15 - 25 % average rate of return. In mutual funds more risk you take the more growth you can achieve. So be cautious and invest based on your risk taking capability.
Lump Sum SIP Calculator
Lump sum SIP Calculator is nothing but a compounded investment having a risk factor involved. It is like a Fixed deposit with associated risk. So to calculate your maturity you can simply use compound interest calculator given on this page. The only thing that you should enter here carefully and practically is your expected average rate of return. If you are able to do that accurately then you will get correct figures for maturity of your lump sum SIP.