Mutual Funds are a popular, investor-friendly and convenient way of investing one’s savings into the equity and debt markets. It is a kind of financial vehicle that pools money from investors to further invest it in stocks, bonds, money market instruments and other assets. In a mutual fund investment, the decisions are made by professional fund managers who conduct thorough research through a team of expert analysts in order to make sure that the fund meets its objectives as mentioned in the scheme information document.
To invest in mutual funds, we can explore the most popular way of investing in it – SIP. Also known as a systematic investment plan, this method helps investors be able to make customized periodic (monthly, daily, quarterly, or yearly) investments in mutual fund schemes over a tenure decided by the investors. SIP mutual funds thus have become a simple way of investing for future financial goals using mutual funds.
SIP Calculator & how it helps
The time period for each SIP can be unique as different investors invest for their different goals depending upon their age and goal requirements. For example, retirement planning is ideally a lifelong process which includes strategizing, allocating, saving and then investing to finally reaping the benefits when you are no longer working. One needs to understand various facets to this such as the time horizon, estimated spending post retirement, post-tax returns, in order to know what amount they are aiming to save. This helps to bring clarity in the SIP investment process and proceed based on a given target.
Suppose, you wish to accumulate a corpus of Rs 50 lakhs after 30 years of your work life, with Rs 1 lakh as your current savings, you assume the inflation to be 5% and returns to be annual 12% as you are investing in equity mutual funds. You can achieve the above goal with a monthly SIP of Rs 5,739. This is the amount you need to invest in an SIP mutual fund from today, for reaching your retirement goal.
But how did we calculate the above? It was with the help of a SIP return calculator. SIP calculator is an efficient tool that helps in understanding the amount one needs to start saving for reaching a desired financial goal.
Let us take another example here – Suppose, you are able to invest a small amount of monthly Rs 5,000 through SIP mutual fund investment over 15 years’ time period and you expect the returns to be 12%. Then, your estimated corpus after 15 years would be Rs. 25,22,880. Hence, a small amount invested in a disciplined way over a long term period can build a substantial corpus for you. Here again, the SIP calculator helped us calculate the above within seconds.
SIP Calculator eliminates the hassle and error of manual calculations, thus saving time. It definitely facilitates the decision making when it comes to how much and for how long a person should invest through SIP in mutual fund schemes for heading towards their financial goals.
The easiest and most efficient way to calculate SIP returns, as discussed here, is the SIP return calculator. It is available online and one can make full use of it for informed decision making pertaining to their mutual fund investments.
Why You Must Invest in Mutual Funds?
There are various reasons why you must make an investment in mutual funds. Mentioned below are these reasons:
1. Professional Management:
Most mutual fund managers are highly experienced professionals who make well-informed decisions on buying and selling investment products based on the fund’s objectives, performance goals and risk profile. You can benefit from the expertise of these professionals without having the need to do the research or analysis yourself.
2. Cost Effectiveness:
With mutual funds, you can invest in a variety of investments with minimal capital outlay. Since mutual funds pool money from many investors, the cost per unit is much lower compared to investing individually. Along with this, mutual funds also come with lower management fees compared to other investments and are relatively inexpensive in the long-term. This makes them a great option for investors who want to achieve their financial goals without spending too much money on management costs or transaction fees.
3. Diversification:
By investing in mutual funds, you can invest across asset classes and geographies, allowing you to diversify your portfolio and reduce risk. Mutual funds provide exposure to different types of stocks, bonds, commodities, and currencies; this helps spread out risk across different markets and industries. Additionally, because of their structure as an open-ended scheme, mutual funds offer flexibility by allowing investors to buy into a fund at any time or redeem their holdings anytime they need liquidity.
4. Liquidity:
Mutual funds are highly liquid and offer quick access to your investments when needed. Moreover, unlike other investments like real estate where you may have to wait for some time in order to realize returns on your investment, mutual funds allow you to sell off your units anytime without incurring any losses.
5. Reduces Tax Liability:
Investing in mutual funds is the simplest way to reduce your tax liabilities. Many mutual fund investors are able to take advantage of certain tax benefits and deductions, such as claiming a deduction up to Rs. 1.5 lakh on investments made in Equity Linked Savings Scheme (ELSS). This can help investors save a substantial amount of money. This can help reduce the amount of money you owe in taxes and potentially increase your overall return on investment.
6. You can Invest in Small Amounts:
Mutual funds are some of the most cost-effective ways to build wealth. This is because you can invest in mutual funds with very small amounts. You can start investing in mutual funds with as little as a few hundred dollars, and even smaller amounts if you choose an automated investing service like Betterment or Wealthfront. This makes it possible for those who don’t have much money to save and invest for their future.
