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How Does An ELSS Calculator Work? What Are Its Benefits?

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An Equity Linked Savings Schemes (ELSS) calculator is a convenient tool that allows you to estimate the potential returns from an ELSS fund investment. It also determines the returns based on the investment type, such as Systematic Investment Plan (SIP) or Lump sum investment. 

Lately, SIP investments have become a popular investment choice among millennials. Considering that, you might want to know more about calculating returns on mutual fund investment made through SIPs. 

In the following segment, you will find details on an ELSS calculator with respect to Systematic Investment Plans and their benefits. 

Working of an ELSS calculator for SIP investments

An SIP calculator works on the following formula:

M= P x [{(1 + i) ^n – 1}/i] x (1 + i)

Where, 

M= Maturity amount

P= Investment amount at regular intervals

n= Number of payments

i= periodic interest rate

To understand how this calculator works, you might want to consider the following example:

Aditya wants to invest Rs.2000 per month for a year at an annual interest rate of 12%. 

Therefore, his monthly return rate of return will be= 12%/12

= 1/100

= 0.01

Hence, as per the above formula, the maturity amount will be, 

= 2000 x [{(1 + 0.010^{12}-1}/0.01] x (1 + 0.01)

= Rs.25,619 (approx)

Note that the rate of interest on SIP investments can change as per market conditions. This can change your estimated returns accordingly. 

What is SIP?

A Systematic Investment Plan is a kind of mutual fund investment method that allows an investor to choose a scheme and invest in a fixed amount of his choice at fixed intervals. For instance, you can invest in a small amount such as Rs.500 and choose the tenure as per your requirement. 

Further, you can invest in SIP monthly, quarterly or semi-annually as per your choice. As you can invest on your terms with this investment mode, you have a chance of obtaining maximum returns. 

Thus, if you lack funds to invest in funds like Navi’s Long Term Advantage ELSS Fund Direct-Growth, you can invest using a SIP plan. Use an ELSS calculator to estimate your returns for such investments.  

Types of SIPs

Top-up SIP

Under this scheme, you can increase your investment periodically at your convenience. This means you can invest more when you have abundant funds available and vice-versa. Further, this allows you to make the most of your investments by choosing high performing funds at regular intervals. 

Flexible SIP

This Systematic Investment Plan offers flexibility in terms of the amount you want to invest. In this manner, you can increase or decrease the investment amount based on your cash flow requirements. 

Perpetual SIP

Perpetual SIP allows you to carry on with your investment without an end to the mandate date. This means you can withdraw the invested amount any time you want as per your requirement. 

How to Use SIP Calculator Online?

By following the below-mentioned steps, you can use a SIP calculator conveniently:

  1. Enter the amount of investment for each month.
  2. Enter the tenure of investment (in years)
  3. Feed-in the expected return rate (per annum) 

After entering the above information, the calculator will display the return amount.

Also Read: Different Types of Mutual Fund: How To Choose The Right Fund

Benefits of Investing in SIPs

Power of Compounding

When the returns you earn on your investments start earning returns, compounding occurs. Simply put, when you start investing periodically through SIPs, your returns are reinvested. This results in a snowball effect, increasing your returns substantially. The best way to maximise your wealth gains is to stay invested for a longer period. 

Low initial investment amount

You can start investing in mutual funds through SIPs with a very small initial amount. Hence, this is an affordable way of investing that helps you meet your financial goal in a hassle-free manner. Furthermore, fund houses allow you to top up your SIPs regularly. 

Rupee cost averaging

With this concept, you get to purchase more units when the fund’s Net Asset Value (NAV) is running low and fewer units when the NAV is high. In this way, SIPs average out your purchasing costs over the investment period tenure. Therefore, by investing in SIP, you need not worry about how to time the market. 

Convenience

Unlike other investment modes, investing in SIPs does not require extensive research and market analysis required to balance one’s portfolio. Therefore, you can experience convenience in this investing mode. 

Considering the benefits of SIP investment, you can use a SIP investment calculator and estimate your returns effortlessly. As mentioned, this calculator fetches details accurately and in a short span. 

Also Read: Key Differences Between SIP and Mutual Funds

How Can A Mutual Fund SIP Calculator Help You?

Investing in SIPs is a lucrative way to boost your savings for the future. A financial tool such as a SIP calculator will enable you to evaluate your earned returns on completion of investment tenure. 

To that end, you might want to know about the benefits of using such an online tool in more detail. These benefits are:

Accurate results

This calculator fetches accurate results that are fundamental to taking calculated risks. By entering details such as monthly investment amount, expected return rate and tenure, you can get accurate details on the total invested amount, maturity amount and earnings. Evaluating these details manually can increase the scope of mistakes. Therefore, you might want to use a calculator in this aspect. 

Quick calculation

Manually calculating returns on your SIP investments can be a time-consuming process. In this regard, a SIP return calculator can be useful as it gives faster results. Further, this calculator is easily accessible as it is available online. 

Better investment

By using this online tool, you can forecast your investment plans and fetch a variety of outcomes. You can adjust the tenure and investment amount to check how it affects the SIP. In this way, you can choose the best deal and maximise your profitable returns. 

Informed selection of a SIP

This calculator allows you to change the SIP interest rate by keeping the tenure and investment amount constant. In this way, you can check and compare the potential returns on each SIP investment and select the best option. 

Final Word

Now that you know everything about the working and benefits of an ELSS calculator for SIP investments, you can plan your investment and attain your financial goals seamlessly. In addition, by estimating your returns, you will be able to build a large corpus of money in the long run. To invest through SIPs, you can consider fund houses like Navi. Simply download the Navi app and start investing. 

Frequently Asked Questions

What is the minimum amount of investment in a SIP?

The minimum amount you can invest in a SIP is Rs.500. 

How long can you stay invested in a Systematic Investment Plan?

You can stay invested in a mutual fund through a SIP for as long as you want. The minimum tenure of investment is 3 years. 

Other than estimated returns, what other information can you get from an ELSS calculator for SIP investments?

An SIP calculator displays a summary of the amount invested, expected maturity amount and wealth gain. It also shows the estimated returns for various time durations. 

Can I renew an SIP?

Yes, investors can renew a SIP automatically. 

Can I pause my investments in a Systematic Investment Plan?

Yes, fund companies allow you to pause SIP investments for a certain period.

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