You must have enjoyed calculating your future returns from the SIP Calculator with just one click. This calculator has brought complex calculations to the tips of their fingertips. And above all that, this amazing tool is free to use on several online platforms.
Such a high level of accessibility and user friendliness has made the SIP Return Calculator a favorite tool among investors.
But do you know, in how many ways you can use this versatile tool? And more importantly, do you know its potential benefits for you? If not, then don’t worry because this article provides you with the answer to these exact questions.
Additionally, it also highlights some key factors that you should consider every time you use this calculator to get an estimation of your future investment values from mutual funds. So let us start this conversation with a simple definition of this calculator.
What is the SIP Calculator?
This calculator is a tool that can precisely estimate the future returns on your SIP investment. It does not matter how long you want to sustain a systematic investment; if you put the exact tenure in the calculator, it will give you the answer.
And for this, it uses two other inputs that are the fixed amount of investment that you will make at each regular interval and the expected rate of return. A tool cannot be simpler than this. But this does not mean that it is of limited potential.
Why the SIP Calculator is the Investors’ Favorite Tool?
There are 4 key reasons that describe why this calculator is investors’ favorite and they are as follows:
- Simplified calculations to get the future investment values
- A time saver for investors that is easy to use as well.
- You can visualize your future wealth with the help of this tool.
- It encourages investors to start disciplined investments.
These reasons are not the only ones, there may be more. And it completely depends on the user’s smartness to use this tool and get the unexpected benefits out of it.
But if it comes to counting the ways through which you can use the SIP Return Calculator, then there are four ways that you must know about.
What are the Different Ways to Use the SIP Return Calculator?
The following are the ways through which you can get the optimum benefits of such a versatile tool:
1. To Calculate the Value of Future Investment
In order to calculate your future investment value, you will have to decide upon a fixed amount and the tenure of your investment. Once you have these two inputs, you are good to go. Just fill in these details in the dedicated boxes and get the results.
2. To Determine the Most Suitable Fixed Amount
If you are clear about why you want to invest but not about how much you should invest in mutual funds, then this tool can help you determine the most suitable fixed amount. You can try different combinations of the input to find the exact fixed amount that will achieve your goals.
3. To Know the Exact Duration of Investment
You may have decided upon the fixed amount and have the expected rate of returns, but do not know how long you should sustain the best SIP to achieve your goals. In this case, fill in the details regarding the tenure and expected rate of returns, and you will get the duration.
4. To Find the Required Expected Rate of Return
You have fixed the tenure of your investment, the regular interval of payment (monthly or quarterly) and the target amount you want to earn, but you are not sure of the exact expected rate of return. The calculator can solve this problem in just one click.
Despite such significant applications, the SIP Return Calculator, is still has some potential limitations. And as they say, “Precautions are better than a cure”. You should also consider certain factors while using this tool.
Key Factors to Consider While Using the SIP Calculator
You must not be happy after reading that a versatile tool like the SIP Calculator can also have some limitations. But what is true is true. So it will be better for you if you keep some key considerations in mind whenever you use this calculator.
It is evident that the calculator:
- Only considers a constant rate of expected returns.
- Does not include the risk of market volatility in calculations.
- Does not count inflation while calculating your future returns.
- Does not deduct taxes from the final investment values.
So, to eliminate these limitations, you can determine the tax implications for your investment and deduct them from the final investment value to get more accurate results.
You can also adjust the future returns derived from the calculator with the inflation rates to determine whether those returns are feasible or not.
It is up to you how many precautions you take to get the most realistic results from the calculator. And for now, this conversation ends here. So let us wrap up things with a summary.
Summary
No matter how good a tool can be, it is always the user who takes it up to its ultimate potential. This calculator has no doubt some of the most important applications that have made it highly popular among investors.
But the best SIP cannot be found until all the necessary measures are taken. And you are suggested to include all those factors that the calculator is unable to include for you. This way, you will get the most precise future investment values.
