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Picture this scenario: Mr. Rahul, a software engineer, wants to invest in mutual funds via systematic investment plans (SIPs) and accumulate 5 crores in 15 years. The goal of earning 5 crores through an SIP over 15 years is huge and may seem difficult, but it is definitely achievable. To achieve this target, Mr. Rahul needs to invest in the right SIP plans with high returns. However, with different annual return rates for every SIP plan, Mr. Rahul is confused about the monthly investment amount he should contribute. Here, an SIP calculator can help.
An SIP calculator is a financial tool that helps investors estimate the future value of their investments made through SIP based on their investment amount, tenure, and expected rate of return. Let’s find out how Mr. Rahul can use the SIP calculator to calculate his monthly investment amount to reach the Rs. 5 crore goal in 15 years.
Step 1: Find a reliable calculator with an intuitive interface and useful features
Many financial institutions and mutual fund houses offer SIP calculators on their online platforms. Select an SIP calculator that is user-friendly and offers an intuitive interface that simplifies the process of inputting data. Also, check if the calculator presents the results in both charts and graphical form, helping you understand the growth and progress towards your financial goal better.
To put it simply, it should have useful features that allow you to customise your investment details accurately.
Step 2: Input the required details
The calculator will typically ask for the following mutual fund investment details:
- Investment goal– In this case, the desired amount is Rs. 5 crores.
- Tenure– Mr. Rahul is willing to stay invested for 15 years.
- Expected annual return– Let’s assume that the projected rate of return is 12%.
- Frequency– Monthly, quarterly, or annually. Here, Mr. Rahul will choose the monthly interval.
Step 3: Click on calculate
Now, the calculator will generate the monthly SIP amount required to accumulate Rs. 5 crores in 15 years. At a 12% annual return rate, approximately Rs. 1 lakh in monthly contributions will be required as per the tool’s calculations. Mr. Rahul must consistently invest this fixed amount every month throughout the specified 15-year period to accomplish his ambitious financial target.
Step 4: Adjust the plan and strategy
If Mr.Rahul can’t invest Rs. 1 lakh per month, he has other options.
He can extend the investment period. For instance, if his present financial situation allows him to invest only Rs. 50,000 per month, he can extend the investment tenure to 20 years. This adjustment will help him find a more feasible monthly investment amount that aligns with his financial capacity and still allows him to work towards his goal of Rs. 5 crores.
Another practical option for Mr. Rahul is to consider a step-up SIP which lets investors increase their SIP investments at regular intervals. Thus, Mr. Rahul can start with a manageable amount and then increase his contributions. This way, he can align his investment with his growing earning capacity.
The bottom line
So, as you can see, with the SIP calculator, Mr. Rahul is able to figure out the amount he needs to invest monthly to accumulate Rs. 5 crores in 15 years.
By following these simple steps, you can also use the tool to plan and execute your investments with more precision and clarity. No longer do you need to struggle with manual and lengthy calculations. Instead, you can achieve more accuracy in your investment strategy. With the right SIP amount and a strategic long-term plan, you can achieve your financial goals step by step.
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