What is SIP Calculator? How does it Work?

Want to invest your savings so as to two-fold your income? Tons of investment destinations have popped up nowadays. Yet, mutual funds investment plans serve the ideal purpose. Now the question is – are you ready to invest a lump-sum? Or want to invest in intervals? If the later is your choice then SIP or the Systematic Investment Plan works the best.

SIP allows investors to invest in mutual funds that too in a systematic way. Such an approach resists the risk associated with the investments made to the equity funds, without even compromising in the returns. It serves the best investment plan with high returns in India. Now, what the role SIP calculator plays in this context?

An insight into SIP mutual funds investment plans.


What is SIP Calculator?

SIP calculator, unlike other mathematical calculators, allow the users to estimate the return amount that is going to be met by investing small amounts in SIP at regular intervals over a long period of time.

Well, this calculation may certainly be an approximate one. You can never stick to the figures you calculated. However, you can inexorably predict your outcome to some extent. Based on this estimate, the potential investor may even create his own financial plan for a long-term objective. Say, for example, a retirement plan. Surely, balanced funds are appropriate for the retirement or long-term purpose, but SIP also works in a parallel manner. In a whole, the investors are likely to make investments in order to reach the required corpus.

How does SIP Calculator Works? Or better if we say, how can an investor make use of the SIP calculator?

SIP calculator or SIP investment computer make use of the important data or advanced investment strategies to calculate the absolute value of the investment. Till now, we all are too much familiar with the definition of SIP calculator. But do you know how it actually works?

Here we have stacked down some important steps that if followed can govern you to compute the approximate amount.

Step1: Initially, the investor needs to enter the principal amount of investment that he or she desires to invest in a monthly basis. It can be either an investment of minimum Rs 500 or it can even be the scheme to invest with Rs 1000 minimum.

Step2: Secondly, the step includes the evaluation of the possible rate of return on the investment.

Step3: The third step involves the tenure of investment. For every investor, figuring out the time period of the investment is very important. This helps you to determine the period they want to stay invested. Generally, the minimum time period in a SIP is for 6 months. Whatever it may be, SIP serves the best investment plan with high returns in India.

There are some cool ways to make your mighty investment plans. But before committing to any investment strategies, it is crucial to check out your returns on a SIP calculator online. You can change the variables according to your wish and evaluate the estimate of the returns that can be earned on your principal amount.

Balanced Funds For Retirement – What are its Pros and Cons?

Are you ready with your retirement plans? Standing at the doorstep of your retirement and planning for something productive is completely frivolous. However, if you start planning from today no one can cease you from enjoying your retired life.

So, what are your retirement investment plans?

A balanced fund is one of the best alternatives for intermediate-term investors, specially made for the retirement. Balanced funds or hybrid funds deal with money that is spread across a diversified portfolio of stocks and bonds. Most often it actually specifies an allocation of about 60% stocks and 40% bonds and sticks closely to that allocation itself. Such a moderate risk approach are truly suitable for those in and near retirement.

Let us check out the pros and cons associated with these hybrid funds.

Pros of Hybrid Funds

1. Balanced funds allow the investors to own one fund that automatically selects the underlying stock and bond investments for you. There is no need for you to select a stock fund and a bond fund individually.
   
   
2. A balanced fund is one of the best mutual fund investment plans if you are planning for retirement. Hence, since the mutual fund advisors or the management team itself will take the responsibility, you are free from dealing with any such headaches. The experts or better if we say, the financial advisors are in charge of selecting the right partner undergoing advanced market research, monitor your investments, and make improvements whenever necessary. You just have to choose from the risk-based recommendations they offer and invest your saving to earn high in the end.
   
   
3. Just like SIP (Systematic Investment Plan), Balanced Funds grant you an option of investing smaller amounts in a periodic manner. You don't have to pay a lump sum. Just a minimum amount will help you to purchase happiness for the whole retired life.
   
   

Cons of Hybrid Fund

1. There are times when the fees in a balanced fund is a bit higher relative to the index funds. This is completely owing to the responsibility of the fund management team.
   
   
2. Since the financial management team has the complete responsibility, you don't have any option to make your own choices regarding the type of stocks such as international, small cap, large cap, or regarding the type of bonds such as government, corporate or high yields.
   
   
3. While your portfolio size enhances during your accumulation phase, if you have investments across multiple accounts it may make sense to find certain investment types like bonds within tax-deferred retirement accounts, stocks within the non-retirement brokerage accounts. Such an approach is not possible if you are investing in balanced funds.
   
   
4. Now reaching the retirement phase, if you are holding a large portfolio size and multiple accounts you have the option of using a bond ladder. This is again not possible if you are planning to spend money on the balanced fund.

So, what are your plans today? Will you go for balanced funds or simply shift to any other investment portfolios? Whatever may be your decision, work ASAP. Talk to your financial advisors. They will present you a distilled clear version of mutual fund investment plans with a complete financial strategy.

How Do Financial Planners Charge Fees For Their Services?

A financial planner will be able to help you meet your financial goals, both short-term and long-term ones. Since in India, there is no such standardization in financial planning cost, most people remain confused regarding the average cost and its related features. Not every financial planner charge an equal amount.

Before hiring the services of one, you must make sure that you understand their service fee structure and every single element covered in the fee charged. This is where you can understand the trustworthy nature of a financial planner. The right people will explain to you what value they add in exchange of their charged fees and how will they be of assistance to you. 

Let's discuss this topic elaborately below.

4 ways these planners charge fees from you 

There are different ways of charging fees from a customer. For financial planners, they have four such available options with them, to charge fees for professional services provided to their clients. Let's explore them here.

Advisory charges

What most planners do is, they charge a certain compensation for the preparation of a financial plan. However, the amount differs from one advisor to another. The payment will vary according to the value presented by the financial expert. But do remember to check them out before their selection. 

They develop a suitable plan and give them to you, along with a few other recommendations like to opt for mutual funds investment plans instead.

Commission-based charges

There are many planners who follow this fee structure. After developing relevant plans, they do not charge anything further for asset management. But they require their customers to invest in schemes like mutual funds investment plans via them. They thereby, earn a certain percentage of commission for this.

Asset-based charges

A lot of financial planners engage in client wealth management. They usually charge a certain small percentage of their assets every year for this service rendered. However, you must remain careful of those planners who demand a higher percentage for managing a greater amount of wealth. The time taken to manage two contrasting wealth figures is the same. So, there should be no hike in service charges. 

Performance-based charges

This scenario arises when a customer desires a higher return on their investments and thus hire a financial planner for the same. So, in such a situation the planner receives a basic fee for their service and in addition, they are entitled to a distinct charge, if his customer manages to receive higher returns on their investments through his guidance.

How proper financial planning assists money saving?

Money saving is something that people should immediately start doing in their life if they have not started yet! Everyone desires a wonderful life, that they can live to their fullest and enjoy every ounce of it. Saving your valuable earnings and incomes is one of the best ways to do so. So, what good will monetary saving do to you? 

One of the primary aspects of adulthood revolves around being financially independent and accomplishing the set financial targets. Living the lifestyle you desire requires proper financial planning along with a set monetary saving goal. Therefore, handling your own funds in an appropriate manner will allow you to go on with a proper saving scheme later.

How do financial planning help to fulfill a money-saving plan? 

Financial planning and money saving are inter-linked. One needs to do proper financial planning in order to do savings and then plan later on. An increasing number of people are now delving into the different financial schemes involving safe investments with high returns in India Now let me show you how it's done.

Financial framework

Where most people fail to do the correct financial planning and the subsequent money saving process is, they lack a financial system or framework. Most of us do not know the future value of our assets, incomes, liabilities, estate etc. Clarity is needed in order to make the best financial plans. 

You need to evaluate your overall money-generating assets and be clear regarding the kind of financial planning ideas you seek for your future. In case you are thinking about proper financial plan making and how to save money fast?” then consult the best financial advisor near you today!

Measurable financial goals

Financial planning and eventual money saving schemes come into the picture when you set different targets, that you want to achieve at a certain point in your life. Like for instance, you have a plan that after a few years of your work life you will leave your job and begin a business of your own.  

So, to achieve this plan, you need to start saving from now onwards and fulfill your desires later. Trying out safe investments with high returns in India are one of the best choices that you will make.

Dealing with uncertainty

Life is uncertain. You never know when bad time enters your life and snatches away your happiness! So, it goes without saying that you prepare early on and meet these dark phases with all your strength. Financial planning needs to be done in a way that you save money for such times in life. 

So, if you are wondering how to save money fast to have a secure future, then insurance and the security funds are the way to do so! Money saving through proper planning will ensure a good portion of the time is handled with ease. Uncertainties in life can never be avoided. The best we can do is prepare ourselves and face them bravely.

How ULIP Differs From Mutual Fund?

Before getting into details – how ULIP and Mutual Fund varies, it is your prior need to know the exact definition of ULIP and Mutual Fund. Once you are done with it, you can automatically list down the differences in your mind and make your investments appropriately.

Unit Linked Insurance Plan or better known as ULIP is an integrated plan that allows the investors to secure their future with both insurance and investment. A part of the premium paid by the investor is used so as to provide an insurance coverage and the remaining portion is utilized to purchase securities, in a similar manner just as the mutual funds. Therefore, you can neither call it a pure insurance policy, nor you can define it as a pure mutual fund. 

On the other hand, mutual funds offer economies of scale, high-level diversification, and liquidity, by pooling money from the investors. They accumulate money from the investors and invest them in different assets with an aim to earn a high return. Considering all these into account, wealth creation investing on mutual funds is treated as one of the most common investment options today. 

This was just a brief description of the two. Let us get into details to understand the differences.

1. Additional Features: 

Unlike mutual funds, ULIP offers a few more additional features that range from securing life with an insurance plan, switching between funds during the policy tenure, reducing or enhancing the protection level, surrendering the policy, as well as, enhancing the coverage and tax benefits. Whereas mutual funds neither offer any life cover nor you are allowed to customize any policy. On these grounds, it can be concluded that investors who are aiming for wealth creation with a certain viewpoint and are worried about that these needs may not be fulfilled if they are not present in the future, ULIP products may serve them in a better manner. Additionally, on behalf of the company, the family will also be provided with a regular income for the rest of the policy tenure.

2. Tax Savings: 

Tax benefits from investing in ULIPs is according to Section 80C of the Income Tax Act. Based on this, the tax deduction is possible up to Rs1.5 lacs maximum. The maturity income is exempted from the income tax as well as the minimum death benefit is at least 10 times the premium you invest annually. Well, if you see apparently, you will find equity funds do not allow any such benefits. However, the Equity Linked Saving Schemes (ELSS), one of the wealth creation strategies of mutual funds offer you with the same tax deduction feasibilities.

3. Charges: 

At a glance, there is no comparison between ULIP and mutual funds as such. But the main difference lies when it comes to charges. Unlike other insurance policies or mutual funds, ULIP schemes possess a long list of applicable charges that are deducted from the premium itself. These fees mainly include administration charges, premium allocation fees, fund switching charges, mortality fees, and even policy surrender charges. The more you customize the more you have to pay – that's their policy. There are even some insurers who ask for a Guarantee charge as well, in order to build a minimum guaranty under the paid policy. 

In contrast to this, mutual funds only charge for managing your investment and an exit fee, which is basically the penalty added due to selling units just after you invest in your scheme. Well, in this ground, we will say mutual funds are more cost-effective than ULIPs.

Often investors get confused between mutual funds and ULIPs and also between mutual funds and stocks. Consequently, they end up investing in the wrong palette. Hope you will not dare to repeat others' mistake. It should be crystal-cleared to you that if you are seeking for liquid from your investment as well as wanna spend less and gain more then you must opt for mutual funds. Otherwise, if you are also heading to secure your family in your absence, then we guess ULIPs are the best. Moreover, ULIPs have a lock-in period of five years, which means you are not allowed to withdraw your money within this time-period. While in ELSS mutual funds, you are allowed to enjoy a lock-in period of three years. 

Which one would you like to prefer? Whatever it may be, go through in details discreetly, get through the different portfolios, consult with experts and plan your goal accordingly.