The Systematic Investment Plan or SIP is an investment option for investors. that allows them to invest a fixed amount of money periodically over a period of time. The term SIP is gaining popularity in India due to the number of benefits it offers to investors. SIP is a type of mutual fund that can be acquired with a small amount of investment. In the Indian financial market, SIP investments serve as a viable option for individual investors. who want to invest in the capital market with limited resources.
Hybrid mutual funds
Hybrid mutual funds are a type of mutual fund that invests in a mix of debt and equity. The category of hybrid mutual funds is popular among investors. Because it aims to provide regular income, capital appreciation, and an opportunity to invest in equity to generate long-term wealth.
SIP investment is available for a minimum amount of 500 INR. There is no upper limit on the amount of investment. With a small investment, one can start investing in the Indian financial market and enjoy the benefit of rupee-cost averaging. Rupee-cost averaging is a process of investing a fixed amount at regular intervals irrespective of the market situation. It ensures that investors buy more units when the market is low and fewer units when the market is high. It helps to reduce the average cost of investments over time, maximize returns, and minimize risks.
For instance, let’s assume Mr. X wants to invest in a hybrid mutual fund through SIP investment. He invests 5,000 INR per month for 24 months in a hybrid mutual fund. The illustration below shows how much he would have invested in total at the end of 24 months and how much he would have earned.
Investment per month: 5000 INR
Investment period: 24 months
Total Investment: 120,000 INR
NAV at the beginning of the investment period: 50 INR
NAV at the end of the investment period: 70 INR
Units bought at the beginning of the investment period: 1000 units
Units bought at the end of the investment period: 1714 units
Total units bought: 2558 units
The total value of the mutual fund at the end of the investment period: 119,948 INR
Total returns earned: 938 INR
This illustration shows that Mr. X invested 120,000 INR in a hybrid mutual fund over 24 months, and at the end of the investment period, he earned a total of 938 INR. Investing in SIP helps to achieve investment goals by investing a small amount of money wisely over an extended period of time.
What is an SIP calculator?
Financial foresight, the SIP calculator emerges as a pivotal instrument, orchestrating a symphony of intricate estimations. It is for investors keen on unraveling the potential yields in their mutual fund endeavors. SIP, is an investment methodology weaving a tapestry of fixed contributions at consistent intervals. Usually on a monthly cadence, beckons the discerning investor to engage in a dance with financial prudence. The SIP calculator, a maestro in its own right, employs a set of parameters to conjure an approximation of the future value of the investment, a crystal ball fueled by user-provided inputs.
Embarking on a journey through the labyrinthine workings of a SIP calculator, one encounters the following keystones and their myriad applications:
Investment Quantum:
Enter the realm where users inscribe the grandeur of their investment aspirations, articulating the fixed sum destined for each SIP installment. A bespoke choice, a financial manifesto drafted by the investor’s hand.
Investment Pulsation:
Investors, akin to conductors wielding batons, dictate the rhythm of their financial symphony. Monthly undulations often define this cadence, yet outliers may opt for quarterly or annual orchestral performances.
Investment Chronology:
Users unfurl the scroll of temporal commitment, designating the span during which their SIP ballet is destined to grace the financial stage. Months may transpire, or years may waltz through this temporal tapestry.
Anticipated Annual Returns:
An artist’s palette of speculative hues, wherein investors splash the canvas with their assumed rate of return. A speculative ballet, for the market’s true overture remains shrouded in the veils of uncertainty.
The SIP calculator, a silent sorcerer, then alchemizes this profusion of data, weaving it into an ephemeral tapestry, a glimpse into the potential future value of the financial voyage. A whisper of compounding’s magic over time, a siren song luring investors to craft pragmatic financial dreams.
Purposes of SIP Calculator:
Aspirational Cartography:
Pioneering investors navigate the celestial expanse of financial aspirations using the SIP calculator, charting courses towards homes, education citadels, or retirement realms. The investment amount, duration, and return expectations – malleable tools sculpting the contours of these financial constellations.
Risk Prowess Evaluation:
The calculator, a dexterous muse, invites investors to choreograph scenarios of differing investment sums and durations, an avant-garde dance with potential returns. A canvas for risk scrutiny, guiding investors to informed decisions aligned with their risk temperaments.
Comparative Odyssey:
Investors embark on odysseys of comparison, traversing the potential returnscape of distinct mutual funds or investment tableaus using the SIP calculator. A compass steering them toward funds harmonizing with financial objectives and risk predilections.
Expectation Realism:
The calculator serves as a compass of realism, projecting the future investment opulence with unvarnished verity. An elixir of pragmatic projections, steering investors away from the sirens of unrealistic return assumptions.
In conclusion, SIP investments cater to all budgets and is an excellent investment option for investors who want to enter the financial market with limited resources. However, before investing in the Indian financial market, investors need to gauge all the pros and cons of trading in the Indian financial market.
