Systematic Investment Plan or SIP is a type of investment option in which certain amount (usually in
multiple's of 100, 500 or 1000) is invested in mutual funds on regular basis. The sip scheme is
offered by a mutual fund company to investor so that investment can be done in small amount as well.
SIP is like "little drops of water makes ocean". There are numerous advantages of the scheme which
makes it much more popular. We have listed down some of them below.
Let us discuss further with real time example. An investor can spare 5000 on monthly basis
and agrees to do so of next 7 years expecting average return as 18 %. You can use our SIP calculator to compute it as per your need. Here
investor pays 5000 * 12 * 7 = 420,000 over the period of 7 years to mutual fund company. Now
as per annual compounding and considering mutual fund is performing well his return is 18 %
per annum. Total interest investor will get after 7 years = 377,723.95 and total maturity
value investor will get after 7 years = 797,723.95. Look at the amount investor has invested
(420,000.00)
and look at the maturity value he is getting back (797,723.95). The money is almost doubled
in 7 years of span.
Please
refer
below image from our calculator screen.