When investing in mutual funds, every investor wants to maximise their returns. The simple SIP calculator can be your chief ally in effectively leveraging the compounding benefits of MFs. While SIP calculators can help streamline the investment process by effortlessly calculating your total corpus and returns in seconds, they can also help you understand how to maximise your returns. This article outlines how you can maximise returns by using the best SIP calculators.
Ways to maximise returns with an SIP calculator
Using an SIP calculator can help you plan your investments effectively to maximise returns. Here’s a list of strategies you can adopt to maximise returns using the best SIP calculator:
Identify your financial goals and target amount
Goal-based investments are key to maximising your returns. Therefore, before you use an SIP calculator to estimate your earnings, it’s always prudent to identify your investment goal. Setting clear, achievable, realistic, and time-bound goals will help you understand the target amount needed to achieve the goal as well as the time horizon of the goal. For instance, if you wish to purchase a high-end gaming laptop from an online marketplace, you can estimate the cost of the product to ascertain your target amount. Similarly, you can also ascertain when you want to purchase the item to understand when you need to redeem your investment. Understanding these parameters will help you run simulations on the SIP calculator to effectively maximise returns.
Use the step-up feature
One of the best ways to maximise returns on your investment is gradually increasing your SIP contributions over time. If you are a salaried individual, you can channel the annual growth in your salary to increase your investment to benefit better from the compounding effect of SIPs. Step-up SIP calculators help you specify the percentage or amount by which you want to increase your SIP contributions annually. For instance, if you start with a monthly SIP of Rs. 5,000 in 2025 and increase it by 10% annually for the next 5 years, the final corpus will be larger than a fixed SIP over the same tenure. Apart from maximising returns, increasing your contributions also helps reduce the impact of inflation on your corpus. You can easily access step-up SIP calculators on websites of mutual fund houses, NBFCs, and other aggregator sites.
Run different scenarios to finalise investment parameters
SIP calculators are versatile tools that can offer you the flexibility of running multiple simulations to optimise your investment plan. You can alter the different investment parameters like SIP contributions, investment tenure, and expected rate of return to see how you can maximise returns. Let’s say you wish to build a corpus of Rs. 5 Lakhs in the next 2-3 years to procure the downpayment on a home. In this case, you can use an SIP calculator to see how increasing your monthly contribution amount affects your returns. You can also try extending the SIP duration from 2 to 3 years to enhance the compounding benefits for better returns. Additionally, you can alter the different expected return rates to see how your investment will grow. These trial runs can help you find the right investment parameters to maximise returns for a goal within the set time horizon.
Compare different mutual fund schemes
Choosing the right mutual fund scheme can play a vital role in the total returns you earn from your investment. SIP calculators can help you compare various MF schemes and select one that best aligns with your goals, risk appetite, and return expectation. For instance, equity funds generally offer a higher rate of return varying from 10%-14%, while debt funds offer returns of around 7%-9%. By using the SIP calculator tool, you can visualise the difference in corpus value if you choose an equity fund over a debt fund or if you choose one equity fund scheme over another. You can also alter other investment parameters to fine-tune your strategy and maximise returns.
Conclusion
The best SIP calculators are created with the sole purpose of helping investors streamline their plans and make informed choices. Starting with set financial goals, clear target amounts, and definite time horizons helps you make the most of a SIP calculator. Similarly, by gradually increasing your investment amount through step-up SIPs, running multiple simulations, and comparing MF schemes, you can plan an effective investment strategy and maximise your returns on the investment.