What is SIP - Features and Benefits with Returns Calculation

SIP full form is Systematic Investment Plan, which is a way to invest specific amount every month in mutual funds, so that you achieve a financial goal within a specific time period. For example, you can start with Rs. 1000 SIP amount every month for next 5 years and get approximately Rs. 82,486 as maturity amount at 12% expected rate of returns. You can increase the SIP amount every year based on the promotions or salary increments to achieve your financial goals before time.

Let us understand what is SIP with features and benefits.

Table of Contents

What is SIP?
SIP Features and Benefits
Mutual Fund SIP Returns Calculation Video
SIP Formula in Excel
SIP Calculator Excel Sheet Download
How to Calculate SIP Returns in Excel
Can I invest 1000 ₹ per month in SIP?
Conclusion

What is SIP?

SIP full form is Systematic Investment Plan
It is a way to invest specific amount every month in mutual fund of your choice
You can also invest in Stocks via SIP. It is similar to RD (Recurring Deposit)
In RD, you get guaranteed returns after 6 months or 1 year which has lower interest rate compared to SIP
SIP in mutual funds is little risky in short term and hence you need to invest for longer duration of at least 5 to 7 years to see your money grow
For long term financial goals, such as buying a new house, new car, children education, marriage, accumulate wealth – you should Start SIP in mutual funds in order to achieve these goals
Saving via RD will usually take 15 to 20 years, which can take 10 years of tenure if you invest via SIP in mutual funds
Historically, we have seen good returns of 12% over the past 25 years in index mutual funds such as Sensex and Nifty

SIP Features and Benefits

Below are some of the SIP Features and Benefits

Regular Investments: SIP enable investors to invest a fixed amount at regular intervals such as monthly or quarterly
Rupee Cost Averaging: By investing regularly, Systematic Investment Plan help average out the cost of mutual fund units over time, reducing the impact of market volatility. So when market goes up, you buy less units of mutual funds, where as when market goes down, you buy more units of mutual funds
Compounding Benefits: Returns earned are reinvested in mutual funds, generating additional earnings over time, provided you select the option of reinvesting (growth option), instead of dividend option
Flexibility: Investors have the flexibility to choose the investment amount and frequency based on their financial situation and goals to be achieved
Convenience: SIPs are easy to set up and often involve automated bank deductions, making investing hassle-free. I have made a video on how to Start SIP Online in SBI with demo, so you can watch that video to know more
Accessibility: SIPs require only a small initial investment such as Rs. 500 or Rs. 1000 per month, making it accessible to a wide range of investors, irrespective of their financial situation. You only need to start instead of excuses getting better of you
Disciplined Investing: With SIPs, you invest in mutual funds consistently every month, thus providing you a disciplined approach and improving the savings habit

Mutual Fund SIP Returns Calculation Video

Watch below video to understand how SIP returns will be calculated in mutual funds with examples

Watch more Videos on YouTube Channel

SIP Formula in Excel

Below is the SIP formula that can be used in excel:

=FV(rate, nper, pmt, [pv], [type])

Below are the components of above formula:

rate is the periodic interest rate.
nper is the total number of payment periods.
pmt is the payment made each period.
pv is the present value (optional; typically 0 for SIP).
type is when the payments are due (0 = end of period, 1 = beginning of period; optional).

Below is the example usage of the SIP formula in excel:

If you invest ₹5,000 per month at an annual interest rate of 12% for 10 years, the formula would look like this:

=FV(12%/12, 10*12, -5000, 0, 0)

Above formula of SIP in excel helps you to know the future value of the sip investment.

In case this formula is complex, you can also download the SIP Calculator Excel Sheet I have made for you, in order to understand how much returns you can get on SIP investments.

You can download the SIP Calculator Excel Sheet using below button.

SIP Calculator Excel Sheet Download

Click below button to download SIP calculator excel sheet:

How to Calculate SIP Returns in Excel

You can easily calculate the SIP returns in excel – which can be downloaded using above button.

Here’s the screenshot of SIP returns calculation in excel, it also provides a way to calculate returns on lumpsum investments.

As sen above, you are allowed to provide SIP investment amount and the expected rate of returns.

So with Rs. 2000 investment per month and 12% expected rate of returns, you can get approximately Rs. 1.64 Lakh after 5 years and Rs. 4.64 Lakh after 10 years.

SIP Calculator in excel is the best way to know the returns on your SIP investments.

Also, in above screenshot, the lumpsum investment of Rs. 1 Lakh grows to Rs. 1.81 Lakh after 5 years and Rs. 3.30 Lakh after 10 years with expected rate of returns as 12%.

Can I invest 1000 ₹ per month in SIP?

Yes you can invest Rs. 1000 per month in SIP. This will help you to grow your money over long term of 7 to 10 years. Also, you can increase the SIP amount after every year so that you achieve your financial goals before time.

You can also start SIp with Rs. 500 every month, so plan your monthly investments accordingly.

Conclusion

So a Systematic Investment Plan (SIP) is a method of investing a fixed amount of money at regular intervals with frequency such as monthly or quarterly, in mutual funds. It offers you with disciplined approach of investing and has several benefits as discussed above.

For any financial goal, you need to have SIP investment allocated with that goal and do not start SIP without any specific financial goal. This will help you to grow your money with a specific intention. If you do not have any goal for now in mind, start SIP with the intention of growing your money exponentially and accumulate wealth to reach 10 Lakh, 50 lakh, 1 crore portfolio and so on. This way you will not regret of not starting SIP in the past!

Some more Reading:

Save Home Loan Interest Amount!

Use Home Loan Excel Calculator that will help you to Save Interest Amount on Home Loan EMI.
Click below button to download Home Loan EMI and Prepayment Calculator in Excel:

Watch how Home Loan Calculator in Excel Works

Income Tax Calculator App – FinCalC

For Income Tax Calculation on your mobile device, you can Download my Android App “FinCalC” which I have developed for you to make your income tax calculation easy.

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More calculators including PPF, SIP returns, Savings account interest and lot more

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