1. What is Mutual Fund SIP?

A Systematic Investment Plan (SIP) is a method of investing a fixed amount regularly in mutual funds. It allows investors to benefit from rupee cost averaging and the power of compounding over time.

2. How Does the Calculator Work?

The calculator uses the future value of annuity formula:

Where:

• \( FV \) — Future Value of investment (USD)
• \( PMT \) — Monthly investment amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Total number of investment periods (months)

Explanation: This formula calculates the future value of a series of equal payments (SIP) made at regular intervals, considering compound interest.

3. Importance of SIP Investment

Details: SIP investments help in disciplined wealth creation, reduce the impact of market volatility through rupee cost averaging, and leverage the power of compounding for long-term financial goals.

4. Using the Calculator

Tips: Enter monthly investment amount in USD, annual expected return rate in percentage, and investment period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is rupee cost averaging in SIP?
A: Rupee cost averaging means you buy more units when prices are low and fewer units when prices are high, averaging out your purchase cost over time.

Q2: How does compounding work in SIP?
A: Compounding means you earn returns not only on your principal but also on the accumulated returns, creating exponential growth over long periods.

Q3: What is a realistic expected return rate?
A: Equity mutual funds historically return 10-12% annually, while debt funds return 6-8%. Actual returns may vary based on market conditions.

Q4: Can I change my SIP amount later?
A: Yes, most mutual funds allow you to increase, decrease, or pause your SIP investments as per your financial situation.

Q5: Are there tax benefits in SIP?
A: ELSS (Equity Linked Savings Scheme) mutual funds offer tax benefits under Section 80C of Income Tax Act with a 3-year lock-in period.