Calculator of Sip

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Systematic Investment Plan (SIP) Calculator

Investment Summary

Total Invested Amount:
Estimated Returns:
Total Value:
function calculateSIP() { var monthlyInvestment = parseFloat(document.getElementById('monthlyInvestment').value); var annualReturnRate = parseFloat(document.getElementById('annualReturnRate').value); var investmentTenure = parseFloat(document.getElementById('investmentTenure').value); if (isNaN(monthlyInvestment) || isNaN(annualReturnRate) || isNaN(investmentTenure) || monthlyInvestment <= 0 || annualReturnRate < 0 || investmentTenure <= 0) { alert("Please enter valid positive numbers for all fields."); return; } var monthlyRate = (annualReturnRate / 100) / 12; var totalMonths = investmentTenure * 12; // Formula: FV = P × ({[1 + i]^n – 1} / i) × (1 + i) var futureValue = monthlyInvestment * ((Math.pow(1 + monthlyRate, totalMonths) – 1) / monthlyRate) * (1 + monthlyRate); var totalInvested = monthlyInvestment * totalMonths; var estReturns = futureValue – totalInvested; document.getElementById('totalInvested').innerText = totalInvested.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }); document.getElementById('estimatedReturns').innerText = estReturns.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }); document.getElementById('totalValue').innerText = futureValue.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 }); document.getElementById('sip-results').style.display = 'block'; }

Understanding Systematic Investment Plans (SIP)

A Systematic Investment Plan (SIP) is a disciplined method of investing in mutual funds. Instead of making a large lump-sum investment, SIP allows you to contribute a fixed amount at regular intervals (usually monthly). This approach leverages the power of compounding and rupee cost averaging to build long-term wealth.

How the SIP Calculator Works

The SIP calculator uses a specific mathematical formula to estimate the future value of your investments based on your regular contributions and an expected rate of return. The formula is:

FV = P × ({[1 + i]^n – 1} / i) × (1 + i)
  • FV: Future Value (the amount you receive at maturity)
  • P: Principal amount (the monthly SIP amount)
  • i: Compounded rate of return (Annual Rate / 12 / 100)
  • n: Number of installments (Total years × 12)

Key Benefits of SIP

  1. Power of Compounding: By investing regularly, the returns you earn on your investment start generating their own returns, leading to exponential growth over long periods.
  2. Rupee Cost Averaging: Since you invest a fixed amount every month, you buy more units when market prices are low and fewer units when prices are high. This averages out the cost of your units over time.
  3. Financial Discipline: SIPs automate your savings, ensuring that you invest before you spend on non-essential items.

Practical Example

Suppose you start a monthly SIP of 10,000 for 15 years. If the mutual fund provides an average annual return of 12%, here is how your wealth would grow:

  • Monthly Investment: 10,000
  • Total Invested Amount: 18,00,000 (10,000 × 12 months × 15 years)
  • Estimated Returns: 32,45,760
  • Total Value after 15 Years: 50,45,760

As seen in this example, your earnings (estimated returns) significantly exceed your actual capital investment, highlighting the effectiveness of long-term systematic investing.

Tips for Successful SIP Investing

To maximize your returns, consider starting as early as possible. The longer your money stays invested, the more time it has to benefit from compounding. Additionally, periodically increasing your SIP amount as your income grows (known as a Step-up SIP) can help you reach your financial goals much faster.

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