An SIP Calculator is a very important tool for you to plan your future savings. Whether you plan to invest in shares, or mutual funds, or bonds, or an RD, whatever be the case, you should know what you should expect as your approximate final value. Of course, shares and mutual funds can swing severely in terms of returns on your money. But overall, if planned well, an SIP calculator (mutual fund calculator), can be used to give you a fair amount of the expect returns.
Here is an SIP calculator which you can use to know future values of the funds/ shares that you are already invested or are planning to invest.
How to use SIP Calculator?
Certain information has to be filled in the calculator to get the future value of the investments.
Monthly investment: Mention here how much to do you plan to invest in your Systematic Investment Plans (SIP). It is like a recurrent deposit account. You save a certain amount for contingencies/planned expenses in the future. This can be as low as Rs. 500 per month in case you plan to invest in mutual funds. You can directly buy company stocks or buy bonds if that is how you want to invest.
Interest Rate: This is the expected return from your investments. Be advised here that you have to build a strong understanding about what should be your expected returns basis the past performance of the stock/ mutual fund as well as the earnings expected in the foreseeable considering the underlying securities the fund has invested in.
In general, you should expect about 12-22% CAGR from your stock/ mutual fund portfolio depending on the returns from the underlying securities and investment strategies you/ your fund manager applies.
It should be made clear that these are not constant returns, market behaves in a very different manner than regular bank FDs. Some years may give huge returns while some can give negative returns as well. There are chances that if you are not invested long enough, you lose money.
Period of investment: This is the most important factor in this scheme of things. The longer you remain invested; more are your chances to generate a strong return value from your portfolio. Here, you have to mention the number of months you want to remain invested.
Interest compounding is generally annually. Here is a table to help you out with year to month conversion for your period section.
Mention your interest rate as per the interest compounding time period. Again, generally it is annually which means you mention the annual interest rates here.
The portfolio that I have created for myself should give around 18% return and considering my current investments at around Rs 50,000, here is what I should be expecting in the coming years.
|Duration||SIP Amount (₹)||Future Value (₹)|
|5 years||50,000||48.8 Lakhs|
|8 years||50,000||1.1 Crores|
|10 years||50,000||1.7 Crores|
|12 years||50,000||2.5 Crores|
|15 years||50,000||4.6 Crores|
|18 years||50,000||8.1 Crores|
|20 years||50,000||11.7 Crores|
|22 years||50,000||16.9 Crores|
|25 years||50,000||29.1 Crores|
|28 years||50,000||50 Crores|
|30 years||50,000||71.6 Crores|
In case the returns touch 20% per year (this is less likely but still easily possible), then the corpus could hit very high levels as per average Indian standards.
|Duration||SIP Amount (₹)||Future Value (₹)|
|5 years||50000||51.7 Lakhs|
|8 years||50000||1.2 Crores|
|10 years||50000||1.9 Crores|
|12 years||50000||3 Crores|
|15 years||50000||5.7 Crores|
|18 years||50000||10.5 Crores|
|20 years||50000||15.8 Crores|
|22 years||50000||23.7 Crores|
|25 years||50000||43.1 Crores|
|28 years||50000||78.5 Crores|
|30 years||50000||116.8 Crores|
This result is based on an investment of just about 1.8 Cr in the next 30 years from my end! I can stop paying after 15 years as well and generate almost similar results (this we can discuss later in some other post or in comments), i.e. an investment of just 90 lakhs. 🙂
Learn how to invest by going through these amazing investment guidance books which will help you to invest better.
Power of Compounding
From 18% to 20%, doesn’t seems like a very big increase right, just 2%. But the returns on your SIP Calculator have shot up drastically. This, is the power of compounding!
As the numbers of years in which you are invested go up, the compounding factor creates huge difference even with slightest change in return rates.
This is the reason it is suggested to start investing as soon as possible. Sooner you start, sooner you get to retire/buy home/travel the world/open your own restaurant, etc, whatever be your dream 🙂
Now you see why it is good to spend some time on your SIP Calculator, apart from giving you motivation to invest, it actually gives you certain idea of your net worth in the near/ far future. Also, you can manage your SIP amount, risk appetite etc according to your foreseeable expenses, or whatever you want to achieve and start investing accordingly.
Please be advised that the calculator only gives an idea of how much you should expect from you investments. The actual returns will vary from the amount mentioned here or calculated from the SIP Calculator. But these numbers give you an approximate idea of what to expect from your investments.
We should not be held liable if your returns do not actually achieve the numbers mentioned here. The idea here is to help you plan to invest, please take these posts in the same manner. 🙂