Investing in a systematic investment plan (SIP) can be a wise strategy to save and grow your money through mutual funds. It allows you to make small investments regularly, eliminates the need for market timing, and balances market volatility by taking advantage of rupee cost averaging.

While it is usually a smart move to invest in SIP plans, there are some mistakes that can be costly and impact your overall returns. This is why many experienced investors and even market experts recommend using an online SIP calculator to organise and plan your investments.

An SIP calculator is designed to calculate your investment returns and determines how much money needs to be invested regularly to reach your target corpus. Moreover, the tool can help you avoid common yet costly mistakes when investing in SIP plans. Read further to learn what these mistakes are and how exactly an SIP calculator can help you avoid them.

  • Not having clear goals

As an investor, it is natural to expect high returns on investments. However, the market can sometimes be volatile and unpredictable. So, it’s important to have realistic goals when investing through an SIP plan. Without proper research on what kind of returns should be expected from your investments, it’s easy to set unrealistic expectations that may lead to a different outcome.

This can be easily avoided by using the features offered by an SIP calculator, such as – estimated return, your risk level, and investment duration. The calculator can give you a better understanding of the potential returns for different durations and risk levels.

  • Selecting an incorrect fund

Picking the right mutual fund scheme is essential for long-term investment success. Different funds offer different returns based on their tenure and risk levels associated with them. Using an SIP calculator can help narrow down the list of available funds that offer better returns and help you ascertain which tenure best meets your needs in terms of expected returns and risk exposure.

  • Unrealistic SIP amount

Investing strategically is crucial to long-term success. But, many investors make one of the two common mistakes when it comes to systematic investment plans: investing too little or too much.

Too little investment won’t have the necessary growth potential, and too much investment amount than necessary could lead to debt if you are unable to pay back those loans later on due to unforeseen circumstances like health problems etc. Using an SIP calculator can help you determine what would be an appropriate amount for each SIP based on your available funds, financial goals, timeline, and risk tolerance.

  • Making short-term investments in equity mutual funds due to poor planning

Equity funds are known for providing higher returns than most other types of funds over longer periods; however, they also carry more risk. Equity investments over shorter periods can be risky as equities are subject to daily fluctuations, which could impact your returns, especially if you exit investments prematurely due to lack of patience or realistic expectations.

To better plan investments, you can use SIP calculators to get more realistic estimations of mutual fund returns over different time frames and create a sound investment strategy.

Closing thoughts

Making wise investment decisions can often be challenging, but having the right tools, knowledge, and strategies can help you to maximise your returns and meet your financial goals. One such tool is the SIP calculator that helps you avoid common SIP investment mistakes and ensures your returns are accurately calculated and expectations are realistic for a profitable investment portfolio.

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