Why Try a SIP Calculator Online Before Starting a SIP
by Shreya Paliwal Mutual Fund Financial services
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An
SIP or systematic investment plan is
an enabler for investors to invest their monthly savings in a regular manner in
mutual fund schemes, which in turn invest in the markets. It helps to build
wealth over the long term, say 5 years or more, with discipline, the benefits
of power of compounding, rupee cost averaging and sound financial advice.
How to Choose the
Best SIP?
Choosing
the right mutual fund scheme for starting your SIP is critical and it determines the smoothness
of your investment journey, hence, you need to note the following points before
starting:
1. Investment Objective: It is imperative to know what you are
investing for, short term or long term, what is your risk profile? These help
in determining which type of fund will suit you as an investor.
2. Fund type:
As mutual funds are of various types, it is important to know which is suitable
for your risk appetite. Let’s have a look at them:
- Equity Mutual Funds:These are the most preferred choice for
doing long term SIP. They are
further categorised into small cap funds, large cap funds, mid cap funds, large
& mid-cap funds, thematic/sector funds, etc. Equity funds are ideal if your
risk profile is high to very high.
- Debt Funds
– Debt funds can be further classified based on the investment tenure. You can
invest in debt funds even for one day. However for SIP, Banking and PSU funds,
Credit risk funds, Short term funds, Corporate Bond funds and long term debt
funds can be ideal. Depending upon how long you want to continue your SIP, you should choose an appropriate
debt fund.
- Hybrid Funds
– These funds invests in both, equity and debt. While the equity portion,
though uncertain, gives you higher returns, the debt portion provides stability
to your portfolio.
- ELSS Funds
– SIP in tax savings funds or ELSS funds
can be considered if you plan to save taxes, while building long term wealth, using
the Income Tax Section 80C route. Tax saving funds are essentially diversified
equity mutual funds and can be suitable if you can take high risk.
In
order to facilitate the process of SIP investment, investor should use SIP
calculator online. This online tool
provides you the advantage of planning your SIP investments without going
through the hassle of manual calculation. It is fast, easy, can be accessed
online and used as per convenience. It also gives confidence to new or
potential mutual fund investors as they get more clarity on how much to start
investing with. There are two types of SIP calculators - SIP calculator online helps you know the future value of your SIP
at an assumed return rate and no. of years while the goal based SIP calculator
helps you plan your goal. It tells you the SIP amount based on your future goal
value, expected return and time period. The former helps to understand the
expected corpus from SIP investment after a tenure and the latter helps to plan
how to reach a certain goal through periodic sip investments.
We discussed the
important points to know about SIP
investing before setting foot in the space in order to gain the best results.
Additionally, we touched upon the benefits of a SIP calculator online that helps to smoothen the SIP ride for
investors.
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Created on Nov 16th 2022 00:04. Viewed 40 times.