5 ways in which a SIP calculator can help you plan your Investments
Investing hard earned money has never been easy – it comes with dozens of complex choices and prerequisites. Especially if you’re considering initiating a SIP (Systematic Investment Plan). With staggered investments over many months, it can get inconvenient calculating what your returns would ultimately look like. However, the process is simplified significantly with the help of a modern tool we call the SIP calculator. It accelerates a large part of our pre-SIP decisions, and is fairly easy to understand, even for someone who has no knowledge of economics for investment markets. Let’s take a closer look at how a SIP calculator can help you plan your investments.
#1 – It Highlights The Effects of Compounding
A SIP calculator works its calculation on the principle of compounding. The difference between Simple Interest and Compound Interest may not be apparent at first glance but, after a few years, compound interest will impact the magnitude of your returns substantially. In simpler words, with the help of a SIP calculator, a transparent picture on your investments is easily accessible, revealing the true returns you’d generate even before you invest a single dime.
#2 – Accuracy
You could very well do by hand the math a SIP calculator performs. Or, you could even plug in numbers a series of times on a traditional calculator. Both cases would, apart from being a poor use of your time, also likely to generate incorrect results. Manual calculations for SIPs, especially those that you’re projecting for many months and years – involve an unnecessarily large number of steps. There’s also a chance of error at every step – which means you’re likely to end up with an incorrect result on longer calculations.
A SIP calculator is a dedicated tool designed to save you the hassle of manual calculation and protect you from the inaccuracies that may arise with it. With a SIP calculator, you’re getting quicker results, and accurate results.
#3 – Automation = Speed
Related to the point above – a SIP calculator, in addition to giving you accurate results, also offers quicker results. Want to see how much profit you’d generate for a 12-month SIP? Simply feed in your numbers. Want to change the tenure to 24 months? Just feed in your new preference. Being an automated tool, the SIP calculator will give you your results within seconds.
As an investor, all you’d need to do is get started with your SIP and begin your investment journey in the mutual fund scheme of your choice. It’s a significant savings in unnecessary and time-consuming efforts.
#4 – It Assists With More Educated Decisions
A clear understanding is key to a good investment and desirable returns. This, of course, entails dealing with information, data, predictions, analyses and more – many of which a SIP calculator offers with ease. Want to get a sense of your profits if the returns were a few percentage points higher? Or what would happen to your funds if you stayed invested for just one more year? Simply change the values on your calculator and watch it simulate the future of your investment within seconds.
On some SIP calculators, you can even check out the ‘Reverse SIP’ option that effortlessly lets you determine how much you’d need your SIP amount to be if you’d like to make a specific amount of returns in a particular time period.
The result? A far more educated decision that relies on data and not on vague approximations (that’d often result in undesirable outcomes in the longer run).
#5 – You Get To See The Advantages of Flexibility
To many, flexibility is often as important as the returns an investment generates. Sure, you could maybe opt for a lumpsum investment – but that may limit the amount of capital you could invest. Or worse, it could impact other aspects of your financial plan. A SIP is often the better choice for many investors. And its advantages are often highlighted via a SIP calculator, that lets you easily see how small investments over the course of many months add up to large returns over the long term. A SIP can also lower the average cost of your investments by taking advantage of market volatility, allowing you to acquire more units of a mutual fund scheme at lower costs.
Informed investment decisions demand prerequisites like market awareness and research, and thorough analysis. A SIP calculator is a boon in such cases owing to its ability to save time and effort in delivering some amount of meaningful data to an investor. Especially if you’re about to begin your investment journey.
