SIP: What is it? How to calculate SIP amount?

SIP or systematic investment plan is the easiest and simple means to build a sufficient retirement corpus or for any other long-term financial goal. Definitely, SIP is the best way to achieve your goals, but are you investing enough to meet all those needs?

Calculate how much you need to invest through SIPs to avoid unpleasant surprises on the eve of your dreams.

1) Calculate the money that you need. Avoid any mental calculation or rough estimates. Work with real numbers to make your financial plans fool proof by just putting a figure to your goal.

2) Fix a time frame. Give a realistic time frame to your investments to achieve your goals.

3) Make room for inflation. You have narrowed down the amount needed and the time frame. But the prices don’t remain the same. Make sure to include 6 or 8 per cent as the inflation rate.

4) Don’t go overboard with your expectations. It is better to be conservative and assume only say, 12-15 per cent returns for the purpose of calculation.

5) Use the PMT formula. With this Excel formula, you can calculate how much you need to invest regularly to create the desired corpus. Hit on the function (fx) button and use the PMT formula.

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About the Author: Maithreyi

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