Why is a SIP Investment Calculator beneficial?

With the rapid rise in online financial planning, more and more smart investors are choosing SIP investments as their investment avenue of choice for meeting their long and short term goals.  As a thumb rule, SIP’s work best when you dispassionately keep them running despite the ups and downs of the markets. Through a mechanism called rupee-cost averaging, SIP’s neatly smoothen out the average purchase price of your units, thereby absorbing some of the risks associated with equity investing and reducing the overall standard deviation of your investment portfolio.

It’s critical that you don’t try and time your SIP investments by stopping and starting them; much better to let the natural flow of the markets run their course instead. SIP returns are not linear in nature and there may be months or years when your returns may be low or even negative – and it becomes all the more important to remain disciplined during these phases. Also, It is highly advisable to use a SIP investment calculator to arrive at your optimal SIP amounts, before you start investing.

A SIP investment calculator  typically asks for a few standard inputs such as monthly investment amount, expected return and goal tenor to give you an estimate of what sort of corpus you can expect to accumulate through your SIP investment plan.

Many online financial planning platforms go one step ahead and provide SIP investment calculator that work in reverse – that is, you start with your target amount and then arrive at the required monthly saving based on the goal tenor and the kind of risk you can afford to take based on this goal tenor. These SIP investment calculators are a whole lot more useful as they allow you to model real world scenarios and financial objectives.

Additionally, a SIP investment calculator that shows you the impact of periodic step ups as well as occasional lump sum “booster” investments (say on an annual basis) can be even more helpful, because it can show you the impact of small and incremental tweaks to your SIP investment plan and the effect it can have on your long term financial goals.

So, if you’re looking to embark upon a SIP investment plan, please use a SIP investment calculator first to determine your ideal savings amounts before you go on to select funds for your goals. Having a solid fix on the numbers can go a long way in ensuring that your investing journey is a fruitful one.