The process of converting your savings to investments can be a difficult transition and one of the best options in the market for doing so can be SIP mutual fund. It is a simple, friendly and viable option for new and existing investors looking to expand their savings into creation of future emergency or financial goal corpuses.
SIP aka Systematic Investment Plan of mutual fund is a hassle-free way of making mutual fund investments for the short, medium or long term, based on one’s financial goals. Every individual has different financial plans for the future such as buying a car or buying a house or wedding or abroad education or child education or using it for starting their start-up, etc. When planned early, followed in a disciplined and meticulous way, with the right financial advice, these goals can be reached systematically by investing in mutual fund schemes through SIP.
SIP mutual fund investment tend to be ideal for the long term- preferably 5 years or more, due to the power of compounding. Although, the fact remains that by just investing in mutual funds for the long term you may not achieve these aforesaid goals. Therefore, the question is how it can be. It is the right SIP amount!
What is the right SIP amount?
For locking this amount, which varies from investor to investor, you need to know the following –
- The future financial goal amount at the current cost
- Number of year after which you want to achieve your goal
- The average rate of inflation
- Know the SIP amount to reach the inflation adjusted financial goal amount
Another way of understanding the right SIP amount for yourself is to use the online tool called SIP calculator. Here, one enters the value they wish to reach in their investment corpus after investing for a certain time period. Then, this online tool tells you ideally how much to invest monthly in a SIP mutual fund for steadily reaching this value. Suppose, Ms. Meera wants to reach a corpus of Rs 10 lakhs after 10 years through her SIP Investment. Then, taking assumed rate of return as 12% and inflation as zero, we find out that the ideal monthly SIP Investment for her would be Rs 4,347. This calculation was done in seconds using a target SIP return calculator.
This is a freely available online tool that helps investors in understanding what they can expect from their SIP investment in mutual fund schemes. Let us understand this better with another simple example- If Moheshputs an amount of Rs. 20,000 monthly in a SIP investmentover a period of 10 years, he can accumulate a corpus valued more than Rs 46 Lakhs, assuming the rate of return to be 12%. In this case, the invested amount by him over 10 years is only Rs 24 Lakhs. Thus, SIP calculator helps him in understanding how much he should keep aside from his monthly salary or allowance, to invest for attaining his financial goals.
In this read, the goal was to understand the interrelation between SIP mutual fund andSIP calculators used to simplify it and how one can truly benefit from investing over a long time period in mutual funds.
