The Systemic investment plan (SIP) is an equity mutual fund. The SIP is used by people or investors to tie down a particular amount of capital for the nearest future be it in five, ten years, etcetera. With the systemic investment plan, a person can make lots of investment for his other retirement before the retirement comes.
The investment plan aims at creating an avenue for individuals to be able to meet the uprising future needs as they set in. Because it is hard to think that the amount at which a good is purchased this year, will be the same amount such a similar good will be sold in the next five top ten years is not feasible. There is likely chance for there to be an increase in the price of the goods therefore a need to calculate the ideal SIP amount to invest is paramount.
- Amount of money required to meet your goal: thus depends on what you want to invest in for the nearest future. When doing this, you should try to be a little bit realistic in your dealings. If you see planning a retirement scheme, you should pick a random possible number which a retirement plan can worry in reality to make your calculation.
- The amount of time you have at hand: this is an essential thing to note because the time when the gain from such an investment is needed must be clearly stated. Knowing the time when such an investment will bring about a better and more presentable amount will create an avenue to be certain of when your money will be needed by you. For a person who have five or two years more for retirement, the time for getting your profit is therefore directly proportional to the gain you receive from an investment.
- Adjust the Goal amount for inflation: this is very important because an increase in the price of good and services is bound to occur over years. Therefore, it is essential to take such a thing into consideration as the inflation rate when making your calculation so as to be able to play safe and determine how much the inflation is going to affect it. The amount choose for inflation must however be a realistic one in nature.
- How much of a return are you expecting: the return rate varies in nature? In a year, the return rate may be about 50%but when calculating you should always use a very realistic and reasonable amount for your return rate. It is also good to use an historical value orange of about 12 to 15 percent which is very realistic in nature.
- Use the PMT formula: here you will be required to input some things like the rate, Nper, Pv, Fv, and Type. These are the important factors that determine your SIP amount for investment. The PMT formula is the excel formula to calculate the amount you need to invest regularly to create the target corpus.
For most investors, the calculation of the SIP may be quite tricky and trivial or they may lack the knowledge of calculating it themselves. However, we will be talking more on how to calculate the ideal SIP amount you are to invest in the stipulated time frame available.Below are the steps involved in the calculation of the systemic investment plan amount.