We all have short term or long-term financial goals. To achieve these goals, it is imperative that you make an investment plan and start your investments such that you can create enough wealth to finance those goals. An STP calculator and an SIP calculator online can help you put a number to your investment projections so that you are assured that you are on the right path.
How does an SIP calculator online work?
Investing in mutual funds through systematic investment plans (SIP) is the most convenient option when you want to build a corpus linked to your short term or long-term goals. By investing a small amount each month in an SIP, you can build considerable wealth due to the power of compounding that such investments offer you. Since the interest on your investments is calculated on a compounded basis and since each month you are depositing a fresh amount which is again compounded, it is very cumbersome to calculate the returns using a calculator or even on an excel sheet.
To solve this problem of computing, you can use a free SIP calculator online to help you understand how much you can hope to accumulate in say X years with say Y amount of investment per month.
For example, say you want to save up Rs 1 crore for your retirement planning. Let us say you are about 30 years old and you want to retire at the age of 60, then you have about 30 years left to accumulate that amount.
Using a free SIP calculator online, you can find out how much amount you need to invest per month to reach your retirement corpus goals. The details you need to put in the calculator are your target amount, the number of years you want to stay invested, The regularity in which you want to invest, and the percentage of returns that you expect the markets to give you. The SIP calculator online will then show you the amount that you should invest to reach your goal.
How does the STP calculator work?
Sometimes you receive a lump sum as a bonus or windfall gains. If you allow the money to sit in your bank, chances are high that you will spend it frivolously. Therefore, you should invest the money immediately after deciding how much of it you want to invest and how much you would like to spend. However, instead of investing your lump sum in a mutual fund at one time you can park it in one fund and then transfer it into another fund of your choice systematically as per your goals.
A Systematic Transfer Plan (STP) is a plan in which an agreed upon fixed amount is transferred from one mutual fund scheme, called the source scheme, to another scheme, called the target scheme, at specific intervals. The NAV of mutual funds does not stay the same every time. So, investing through an STP like this helps you reap the benefits of rupee cost averaging. You can use the help of an online STP calculator to determine how much is the future value of your STP investments.
The inputs that you must feed into an STP calculator are –
- The tenure for which you want to continue the STP investment.
- The lump sum amount that you want to invest in the source scheme, which can be less volatile fund, say a liquid fund.
- The expected growth of return on the liquid fund.
- The expected growth of return on the mutual fund in the target scheme.
The STP calculator then shows you the amount that the investment in the source scheme will grow to and the amount that you will be accumulating at the end of the investment period in the target mutual fund scheme.
As a footnote, it can be said that the STP calculator and the SIP calculator online can help you plan your investments in a structured manner so that you can achieve your financial goals.
