You will be presented with investment modes when you opt for a mutual fund investment. The two investment modes are the lump sum and systematic investment plan (SIP). Under the lump sum mode, you pay for the mutual fund investment at once. So, under the lump sum mode, you must have access to the required investment amount. If not, invest in SIP. With SIP, you can invest in your mutual fund scheme monthly.
How to invest in SIPs?
Here are the steps that are involved in starting SIP for investing in a mutual fund scheme:
- The first step in starting an SIP is ensuring that your KYC (know your customer) papers are ready. Submit your identity and address proofs to your chosen mutual fund’s asset management company (AMC) through an agent or directly.
- Next, select the mutual fund scheme and start investing through SIP online or offline. Online SIP investment is paperless. The offline mode is a more traditional method. You must fill up a form and submit it through a mutual fund distributor or agent in the offline mode.
- Set the investment amount and duration.
- Leave a standing instruction with your bank for the auto-debit. For that, you must also select the auto-debit date.
Follow the four steps above to invest in mutual funds online. However, you must know the required investment amount before starting SIP.
How do you decide the SIP amount?
Your financial goals must govern the money you set aside for SIP investment. Factors like the current cost of your financial goals and inflation play a role in deciding the SIP investment amount. You can use an online SIP calculator to determine the investment amount.
What are SIP calculators?
Mutual fund returns are calculated on the power of compounding. In this feature, the returns you earn are re-invested, which increases if you continue investing over time. Calculate the future value of your mutual fund SIP simply with the help of an SIP calculator. It is a free online tool that estimates the return you might earn from a SIP investment.
How are SIP returns calculated?
Both online SIP calculators and manual SIP calculation uses the following formula:
FV = P × ({[1 + R]n – 1} / R) × (1 + R)
FV: Future value
P: Periodic investment amount
R: Expected return
N: Number of periodic payments
What steps are involved in a SIP calculator?
The steps involved in using an online SIP calculator are:
- First, enter your financial goal.
- Then, enter the expected annual rate of returns.
- Once you follow the two steps above, you will get the monthly investment amount you must invest for different years.
Conclusion:
SIP calculators have made investment easy. They have replaced the manual calculation. That’s because manual calculation is a time-consuming process. A mutual fund calculator works differently. It uses the SIP calculation formula and provides answers in a few seconds. Furthermore, these calculators are easily accessible and free to use.
To know more about systematic investment plan visit Nippon SIP.
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