FINBUZZYOUR ROADMAP TO FINANCIAL FREEDOM

SIP and Lumpsum Calculator

Mutual fund investments are broadly divided into two types: SIP and Lump Sum.

• SIP (Systematic Investment Plan) involves investing small amounts of dollars every month. 
• Lump sum investment involves investing some amount of money in a specific scheme of a mutual fund. 

Both types of mutual fund investment strategies have different benefits. The majority of investors prefer lump sum investments because of high returns and less variable involvement. You may require an online lumpsum calculator to know what estimated returns you have received on your lumpsum MF investment. 

What is a SIP Calculator?

The SIP calculator is a tool for gauging mutual fund return on investments made via SIP. Mutual funds in SIP investments have now become the most popular investment options for U.S. citizens.

These mutual fund sip calculators are built to provide investors with an estimation of their MF investments. However, the MF scheme’s actual returns differ depending on several other factors. The systematic investment plan calculator must justify the expense ratio and exit load (if any).

This SIP calculator will calculate your monthly investment’s expected returns and wealth gain. Based on a projected annual return rate, you’ll get a rough estimation of the maturity amount for your monthly SIP.

Finbuzz’s SIP & Lumpsum Calculator Terminologies

Investment Amount(s): The investment amount is the amount of money required by an investor to buy a property. It is known as the asset’s value which is defined based on some parameters. Investment value depicts an individual’s measurement of the property value of that specific asset. You can mention the amount which you want to invest.

Investment Period: The investment period can be defined as a specific time (in years) for which you need to invest the amount after the fund’s emergence. An investor can freely choose the investment tenure to grow their money and wealth.

Expected Annual Returns (%): The expected annual return is the possibility of having profit or loss than an investor can anticipate on the amount which they have invested. You can calculate the expected annual return by multiplying potential outcomes by the odds of them happening and then adding these outcomes. 

Investment Type: It refers to the type of investment that you want to make as an investor. Decide whether you want to invest monthly, weekly, or quarterly depending on your needs and how much amount you’re investing. A monthly or weekly SIP plan could help you make yourself financially stronger and stable

Adjust for Inflation: It means Finbuzz’s MF SIP calculator allows you to choose the inflation rate that can affect your SIP by reducing the money earned via mutual fund SIP investments. You can choose from the various options – No inflation, six percent, eight percent, ten percent, and twelve percent. 

Note: After choosing and filling in all the * mentioned criteria, you’ll get to know the amount of estimated or expected returns* (which are subject to market risk) based on how much amount you are investing in that particular time frame (which you have chosen).

How Does SIP Calculator Work?

SIP calculator requires a specific formula for its working, which is:

M = P × ({[1 + i]^n – 1} / i) × (1 + i).

Here,

M denotes the amount received on maturity 

P denotes the amount invested at regular intervals 

n denotes the Number of payments made

i denotes the periodic rate of interest.

How Can a SIP Return Calculator Help You?

Walking across the expert views, SIPs are usually considered the most profitable mode of investing funds rather than a lump sum amount.

It helps you become financially independent and inculcate a savings habit to take advantage of future benefits.

The SIP mutual fund calculator is a helpful tool that shows the possible returns you can earn after the investment period.

Some of the benefits of SIP Return Calculators are:

• SIPs are regulated as periodic investment plans under the Federal Securities Laws. Their primary objective is to allow investors to define an investment aim and then work hard to achieve it. These plans enable you to accumulate MF shares indirectly by making small monthly payments, like $50, over 10, 15, or 25 years.
• It shows you the total amount invested. 
• Assist you in identifying the amount that you’re looking to invest in.
• Provides an estimation of the investment returns.

What is SIP?

SIP is often regarded as a Systematic Investment Plan created by a mutual fund that allows you to regularly invest a small amount in the stock market. With SIP, you can buy more units when the market is volatile and high, which helps decrease the average cost per unit. 

Apart from this, SIP helps examine the investment return with the help of compounding.

What are the Benefits of SIP Investment?

1. Power of Compounding 

Compounding enables your investment to increase exponentially. Compound return is the return earned over a specific time frame. It’s an impressive way to maximize your wealth. Moreover, the main trick to extract more compounding benefits is to start investing early. 

2. Riding Through Volatility

Equity markets are more volatile. They fluctuate because of a combination of manifold factors, such as global markets, interest rates, corporate profits, government policies, and more. A SIP helps you avoid market volatility. With the SIP, you get fewer units in high and more in low market conditions. This aids in optimizing the investment return while mitigating the risk factor.

3. Mitigate the Risk of Bad Market Timing

With regular SIP investments, one can minimize the risk of atrocious timing while entering or exiting the market.

4. Instills Discipline

SIP investments make you more disciplined. With diligent investing over time, one can create a huge corpus when the investing period ends.

What are the Types of SIPs?

1. Trigger SIP

Trigger SIP allows users to change the amount of SIP investment at predefined triggers. These triggers are based on the index level or when the investment value breaches a specific threshold. 

2. Flexible SIP

Flexible SIPs are dynamic, allowing you to change your invested amount. Moreover, if you receive a bonus, the possibility of increasing the investment amount will be greater.

3. Top-Up SIP

In Top-up SIPs, you can maximize the investment amount by a stable amount at predefined intervals. This is also referred to as a “Step-Up SIP.” Compared to stable SIPs, a top-up SIP aids in receiving a higher corpus when the investment tenure ends.

4. Perpetual SIP

The investment tenure in a Perpetual SIP is not predefined, and the investment is usually made for 1, 3, or 5 years. However, when the investment tenure is not set beforehand, it becomes a perpetual SIP type.

How to Invest in Mutual Funds?

Mutual fund investment requires you to consider various factors, including choosing the type of fund that matches your goals, research options, an online brokerage account, and fee structure.

And if you’re ready to invest in mutual funds, here are a few steps which you should consider:

1. Calculate Your Investing Budget

There are two ways to calculate your investment budget:

What’s the Cost of Investing in Mutual Funds?

One attractive thing about MF is that once you fulfill the minimum investment, you can decide how much money you want to invest. The minimum range of most MF investments is $500 to $3000; some are $100, and some have a minimum range of $0.

If you pick a fund with an investment of at least $100, you may be able to contribute as much (high or low) as you want.

If you pick a fund with a minimum of $0, you can invest in MF for as little as $1.

Which Mutual Funds Should You Invest in? 

Sometimes, it becomes too difficult to choose which MF to invest in from the manifold options available in the market. In such cases, younger investors have more time to evaluate riskier assets and the uncertain downfalls in the market. 

Here, target date funds play a big role, as they automatically reallocate your asset mix as you age.

2. Decide the Type of Funds (Active or Passive Funds) in Which You Want to Invest 

Do you want to beat market trends and are looking for the best fund type? This guide can help you end your search by providing two types of investing funds:

• Active Investing
• Passive Investing

Active funds are managed by experts who research market trends and buy funds according to those trends. Fund managers can achieve this in the short term or long term depending on market conditions and the fund’s performance.

Passive funds follow a more hands-off approach and are gaining immense popularity. This investing method has fewer fees than active investing. Most passive investors choose ETFs or index funds to invest in, similar to MFs, but cannot be managed professionally. These types of funds have lower managing fees.

3. Understand the Fee Structure 

Whether you pick active or passive funds to invest the amount, it’s evident that companies will charge an annual fee for managing the fund and other running costs, expressed as the cash percentage you invest and called the expense ratio. For instance, a fund with a 1 percent expense ratio will cost you around $10 for every $1000 you invest.

Identifying a fund’s expense ratio takes work. However, it’s worth understanding as these fees can hamper your returns over time.

4. Decide Where to Purchase Mutual Funds 

A brokerage account is a must if you’re investing in stocks, but you must consider some factors before investing. If you contribute to a 401(k) retirement account, there are good chances you’ll already be invested in MFs.

You could purchase the funds directly from companies like Betterment or Fidelity. Moreover, seeking advice from a financial advisor could also be a game changer, but you would need to pay some additional fees.

Some investors opt to purchase MFs via an online brokerage, which provides a broad selection of funds across various companies.

5. Portfolio Management 

Once you decide where to purchase the MF, you should consider how to manage your investment. Your one move would be to rebalance your investment portfolio in a year to align it with your diversification plan. For instance, if one piece of your investments is earning huge gains, you might consider selling off those gains and investing in another piece to gain the balance again.

Moving ahead with your plan will bring you closer to chasing your dreams, and investors need to prepare themselves for both outcomes. Before investing, investors must look into past funds’ performance; this could help them manage their portfolios.

What’s Left?

Investors can contemplate that mutual fund investment calculators and SIP calculators are the same. However, SIPs are the procedure for investing in MFs, the other procedure being investing in a lump sum amount.

A SIP calculator is a tool for determining the investment returns you can earn when investing in such vehicles.

SIPs invest a stable amount in MFs regularly, allowing investors to invest weekly, monthly, or quarterly.

Hurry-up! Start investing in SIPs today and take as much advantage as you can. 

Subscribe to our newsletter for more updates!