SIP Calculator

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Systematic Investment Plans

Different countries have different phrases for this kind of calculation. In some cases these are called Strategic Investment Plans. In others you may see Systematic Investment Plans. Other institutions may have their own phrases for the kind of investment that is about regular savings being made over a longer time period. Whatever the precise phrasing, this is a calculator that will help you work out interest on savings plans that operate over time and that involve what is called ‘cost-averaging’ where you usually make regular monthly payments into the plan.

Benefits

BenefitExplanation
Lower VolatilityA main benefit of this approach is that you are at less risk of volatility in the market savaging a lump sum investment if the market suddenly falls sharply. Over time, the fact that you buy regularly means you are buying units or saving in all market conditions and this builds in a degree of security.
Regular CompoundingIf you are also getting regular compounding you are also ensuring that whatever money is in the plan is always gaining some degree of interest.
SimplicityThey are also useful if you want your investments to be relatively simple, as the plan is set up and simply takes care of itself depending on what funding interval you choose.
DisciplineThey also encourage saving, as they are goal-oriented and seek a Future Value to aim for.

Calculating your SIP

To calculate, you will need the following information.

#Requirement
1monthly investment amount
2how long you’re investing for
3projected annual returns

Your formula looks complicated, but it is quite simple to operate.

FV = P * (\cfrac{[1 + r]^n – 1}{r}) * (1 + r)
FV = future ~value
P = periodic ~amount ~invested, \\~for ~example, ~per month
r = periodic ~interest ~rate \\(as ~a ~decimal)
n = number ~of ~payments ~made

Use the SIP Calculator to play around with different outcomes by plugging in different numbers to see how your Strategic or Systematic Plan could work for you.

Types of SIP

When you seek financial advice, or think through what kind of SIP best suits you, be armed with the following ideas.

Regular Payment Plans, where you make fixed payments at monthly (usually) intervals.

Top-Up Plans, where you can add lump or top-up sums intermittently, as and when you have funds

Flexible Plans, where you can adjust your contributions month by month in line with what you can afford. These can be useful for freelancers where money is variable month by month.

Perpetual Plans, where you have no fixed term but just carry on funding the plan until you close it.

Whatever type of plan you choose, it is worth doing so after using the SIP Calculator to see what differences are made to the Future Value of any plan through the approach you might take to your saving.