How to Calculate SIP Returns, Let’s see how much can you make?

A smarter way to calculate your projected SIP returns over a span of time!

Hello People! Hope you are doing well and having a good time this new year. We recently conducted a poll on our Instagram handle to see how much financially aware people are these days. To my surprise the results of the polls suggested more than 70% of the people did not know how can we invest into stock markets through SIPs or had no knowledge.

India is considered to be a fastest growing economy, yet financial literacy rates are concerning
India is considered to be a fastest growing economy, yet financial literacy rates are concerning

Financial Literacy of India

It was a shock for me at the very first instance but seeing the national survey reports from SEBI’s 2022 evaluation I was even more surprised.

Merely 25-27% of Indians are financially literate. This really compelled me to come up with something which can not just help our user base but also people across India to grow financially.

Creating wealth is an art and not everyone is an artist. I assume our users are having some source of income/savings with them each month. But what do we do with that money? Park them into savings account? Get a Fixed Deposit over a sum? Or a Recurring Deposit? Our minds often do not go beyond these conventional ways.

Moving Out of the Conventional Ways

Considering the inflations raising each year and assuming it again to be somewhere around 6-7%, do you really think the money you have kept in Savings Account/FDs/RDs are actually growing? They merely give interest rates in range of 3-7% varying to different clauses and terms.

Value of your 1,00,000 rupees saved won’t be good enough to be of 1,00,000’s worth in 2030 or onwards. These conventional ways are indeed degrowing your assets. So, what can we do to grow our money with time and good returns?

***Mutual Funds are subject to market risks! Please read the documents carefully and consult your financial advisors before investing***

So, then comes mutual funds into picture which help you invest in markets even by not having much knowledge of technical and fundamentals of different companies available to invest. A mutual fund is managed by a fund house and regulated by the authorities which provides you a way to invest and grow.

Different Types of Mutual Fund Investments

There are two ways to invest in a mutual fund, the first one being a lumpsum investment and the second one SIP (Systematic Investment Plan). We are going to focus on the SIPs in this article to help you understand how it works.

SIPs or Systematic Investment Plans are a disciplined way to invest your money into stock market at regular intervals. Let’s consider person A is investing ₹1000 each month into a fund XYZ. The expected returns from a mutual fund over a horizon of time is considered to be somewhere between 8-12%. Some exceptional funds can also give ~15% annual returns on your investments. But do keep in mind that these works mostly in long terms(at least 5 years).

Sounds crazy right? It indeed is. Let’s use the below SIP calculator to see your returns after 5 years. You can consider your monthly investments, expected returns, and time duration of your investment. And Boom! You have your returns and profits. Checkout

Remember, its a discipline’s game! Once you commit to these investments make sure you are doing it with all dedication throughout your planned horizon. These can be goal oriented as well.

Let’s say if you want to buy a car after 10 years and you want to grow and save your money for that, some may want to have an International Trip out of the profits, while some may be planning to sponsor their wedding on their own. All of these goals would require you to be consistent.

How to choose which Mutual Fund to Invest?

Most people will use the calculator, see the fascinating returns and then the next question would pop up in their mind that which fund should I choose to invest?

Multiple funds come with multiple risks, mutual funds are categorized into different categories as per the market cap.

Large Caps, Mid Caps and Small Caps are the major categories where Large Caps are the top notch companies having a good history of performance and returns. Mid Caps are mid ranged companies which are expected to grow eventually with time. Smalls Caps are considered to be the most volatile fund which can give you enormous returns as well but maximum risk lies in funds like these.

So, then which one to choose? How to make money from mutual fund and also be a safe investor without taking more risks?

The answer is a Index Fund! These funds are focused on the Index which are Nifty and Bank Nifty in case of Indian Stock Market. Index fund for Nifty is going to invest your money into Nifty50(Top 50 companies of India). These companies keep on changing and thus your fund managers would also accordingly work around the portfolios they manage. The average returns of Index funds have been ~12% in long term.

So, for a beginner, starting investments with an Index Fund can be the best option. We will come up with next articles on best Index Funds to invest in 2023.

How to Invest in Mutual Funds without Agents?

Now then, if you have got all these basic knowledge about SIPs and mutual funds then the next question would come is to how to invest in mutual funds? There are multiple platforms which enables you to invest into mutual funds through SIPs. It can be your demat account broker too. If you do not have your Demat Account yet opened then click here to instantly open an account and start investing!

Remember it is always good to invest on your own rather than doing it via agents who charge heavy commissions out of your returns.

We have an extra surprise awaiting for you! If you have got a fair bit of knowledge about SIPs and thinking to exponentially multiply your returns, then this is all for you.

We have explained the concept of Step-Up SIP in this post with a Step-Up SIP calculator as well. Do CheckOut!

Frequently Asked Questions(FAQs):

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