How to Track the Performance of Your SIP investments via SIP Calculator?

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The investment strategy known as a Systematic Investment Plan has become popular among the more than six crore Indians. A SIPis a bit like a savings routine. The systematic investment is where you invest a fixed amount of money in mutual fund schemes for regular intervals of time like weekly, quarterly, or monthly, rather than a lump sum investment of a large amount of money all at once.

In addition to providing you with an estimate of the returns on your mutual fund SIP Investments, the SIP calculator assists you in planning and organizing your expenditures. By letting you examine various situations and investment possibilities, these calculators improve transparency and assist you in making wise financial decisions. Ultimately SIP calculator ensures that you have expectations about your financial goals and how to achieve them

To calculate potential returns from your SIP investments. Understand the SIP calculator.

What is the SIP calculator?

A SIP calculator is an easy tool that enables people to estimate the returns on their SIP-based mutual fund investments. This calculator helps you to identify the future growth value of SIP.

Three essential details must be entered to use a Systematic Investment Plan calculator effectively. Your SIP investment amount is how much money you plan to invest at regular intervals

Step two: figure out how long you want to invest for by defining how many years. The average rate of growth you predict for your assets is the predicted yearly rate of return, to sum it all together.

With the help of this calculator, you may estimate your monthly SIP investments wealth gain, and estimated returns. Based on an anticipated annual return rate, you do receive a rough estimate of the maturity amount for each monthly SIP.

Reserve your seat on financial stability by doing online SIP in mutual funds.

How does the SIP calculator work?

The Sip calculator gives the total investment made in the tenure and the final value of money which includes gains. For the calculation of the final value, this SIP Calculator uses a compounding formula.
let’s understand this concept with an example-

The growth rate each month, assuming an annual growth rate of 15%, is 1.25 percent. Your initial investment of Rs. 1000 increases by 1.25% per month. Let’s break it down. You put in Rs. 1000 during the first month, and so by the end of the month, your investment will grow at the rate of 1.25%.

Now, in the second month, you invest another Rs.1000. However, this calculator adds growth from the previous month. With an additional 1000 rupees invested in the second month, the gain from the first month compounds to give you a total value of Rs. 2038.

Every month's return is compounded, which means that it grows each month. Recognizing typical SIP returns for various mutual fund categories, such as Small Cap, Large Cap, Debt, Equity, and Hybrid, is essential to selecting the appropriate growth rate because these funds provide varying degrees of risk and return.

Best SIP Funds with High Returns in India

To understand the returns of the categories, let's select funds from a total of five different categories, you can calculate the SIP returns of 15 years or you can also see how much risk you can tolerate.

First of all, let's talk about the lowest-risk investment, with a 15-year consistent 8% annualised return on risk investment provided by the  ICICI Prudential medium-term bond fund, try for a growth rate between 8 to 6 percent if you have low risk tolerance.

A 15-year, 14% annualised return is offered by the HDFC Hybrid Fund for investors with medium risk. A growth rate between 12 and 14 percent is appropriate for medium risk takers.

The ICICI Prudential Multi-Cap Fund, for example, promises returns of 14–15% for higher-risk investors, but losses can reach a whopping -20% in times of crisis like 2008. Comparably yielding at sixteen percent, the Nippon India Mid-Cap Fund has the potential for thirty percent drops.

Because of its potential growth rate of 18–20%, the Kotak Small Cap Fund offers returns of 19% but demands a very high risk tolerance. choose a growth rate within the range of 8-20% while considering your risk tolerance.

Is a SIP Calculator Accurate?

Let us see the accuracy of the calculator-

To check how accurate a Mutual Fund SIP calculator is, we compared it to actual SIP investments of Rs.1000 every month for 15 years. What we found is that the calculator usually shows higher growth than what actually happens with different types of funds. When the growth rate is low, like in debt funds, the difference isn't as noticeable. But when the growth rate is high, like in small-cap funds at 19%, the gap becomes more obvious. The reason for this is a thing called compounding. We learned about it while using the calculator. The calculator takes this monthly compounding effect into account, which makes it show a bigger value than what you might actually get from your SIP investments. So, that's why you often see a difference.

Conclusion

So it is advisable to first check your risk tolerance level and then according to that select your investment category. Thereafter select the average return of the category as your growth rate in the calculator.