What is a SIP planner and how to use it effectively?

Wherever we are in our life stage, we all have some specific financial goals such as retirement, first car, higher education, marriage or a secured future. Financial goal planning is the first step towards achieving all the desired growth in life. We must have a worthy plan so that we don’t lag behind in accomplishing our aim.

Planning is an essential part of life as it helps in achieving the set targets. But planning can be difficult for some people especially when it comes to financial planning. People that don’t have a finance background would find it difficult to plan their finances and investments.

To help such people plan and make a well-informed decision, banking institutions have introduced investment tools. The simple and easy to use tools helps us create our own customized investment plan and estimate the maturity value.

What are these investment planning tools? Investment planning tools are instruments used to meet current and future financial goals through a sound financial plan.

These tools help us create an investment plan according to our goals and objectives and also helps us estimate the plan’s maturity value. It helps you figure out the amount you need to invest to meet your financial goal.

A significant part of investing in mutual funds is knowing the returns that you will gain from a SIP or a Lump Sum investment. A mutual fund planner can help you calculate the amount you will have to invest to achieve your goals or how much returns you can expect from the investment you made.

It takes into account the investment routes- lump sum and systematic investment plan (SIP) and finds out the returns generated from various Mutual Fund investments. Mutual fund planner or calculator is an easy to use tool for predicting returns on investment.

What is a lump sum mutual fund planner? Lumpsum investment in a mutual fund refers to a one-time investment that an investor makes. Usually people who have a large sum of disposable income in hand and are willing to take risk go for a lump sum investment. Lumpsum mutual fund planner predicts the yield on your present investment given the expected rate of return and the time period of investment.

What is a SIP planner ? Systematic Investment Plan (SIP) refers to the investment of small amounts of money in a mutual fund plan at regular intervals. People who do not have a large sum of money in hand to invest opt for SIP investment. SIP planner is a tool that predicts the overall return on investment an individual would achieve on the maturity of the investment.

An investor needs to put in principal investment amount & the expected rate of return, to know the final amount payable at maturity. Vis-a-vis, investors can also put in the expected maturity amount to predict the SIP investment they need to make to reach this goal. Anyone who is planning to invest in mutual funds through SIP can use a SIP planner to determine the future value of his/her investments and choose the best SIP plan accordingly. Even if someone is already investing in mutual funds through SIPs, they can still use the calculator to determine the future value of their on-going investments.

How to use the planner/calculator –

To use the calculator, one will be required to provide the following details:

a) Investment amount (Principle amount) – How much money do they want to invest?

b) Duration of investment – How long will they be investing?

c) Frequency of investment – How often will they be investing? Monthly, Quarterly or Yearly.

d) Percentage of expected returns – How much returns do they expect from the investments made.

How does the calculator work? The SIP planner calculator uses the compounding principle to calculate the future of the SIP investments. Based on the information provided by the investor, the calculator calculates the amount they will receive from the SIP investments. If the investor links the investment to their future goals then the planner can help in deciding the principal amount that’ll be needed to fulfil the goal.