What is SIP - Systematic Investment Plan
Systematic Investment Plan (SIP) is one of the most popular ways to invest in mutual funds. Whether you're a seasoned investor or a beginner, an SIP calculator helps you plan your financial journey by estimating your future returns.
PNB SIP Calculator
The PNB SIP Calculator is an online tool provided by Punjab National Bank (PNB) to assist investors
in estimating the future value of their Systematic Investment Plan (SIP) investments.
PNB, one of India’s oldest and most respected banks, offers this calculator to help individuals plan
their mutual fund investments systematically and achieve their financial goals.
By investing a fixed amount regularly through an SIP, you can take advantage of compounding and
rupee cost averaging to build wealth over time.
The PNB SIP Calculator helps you project the potential returns on your investment based on factors
such as monthly contribution, expected rate of return, and investment duration.
Formula Used in PNB SIP Calculator
The formula to calculate the future value of an PNB SIP investment is:
The formula for SIP is: \( FV = P \times \left[ \frac{(1 + \frac{r}{n})^{nt} - 1}{\frac{r}{n}} \right] \times (1 + \frac{r}{n}) \)
Where:\( FV\) = Future Value
\( P\) = Monthly SIP investment
\( r\) = Annual rate of return in decimals (as a decimal, e.g., 12% = 0.12)
\( n\) = Number of compounding periods per year (Usually 12 for monthly SIPs)
\( t\) = Investment tenure in years
Example of PNB SIP Calculation
Let's understand how to calculate PNB SIP returns using an example:
- \(P = 5,000\) (monthly investment)
- \(r = 12\%\) annual interest rate (\(0.12\) as a decimal)
- \(n = 12\) (monthly compounding periods per year)
- \(t = 10\) years
Now, let's substituting these values into the formula:
\( FV = 5000 \times \left[ \frac{(1 + \frac{0.12}{12})^{12 \times 10} - 1}{\frac{0.12}{12}} \right] \times (1 + \frac{0.12}{12}) \)
Step-by-step calculation:
- Monthly interest rate: \( \frac{r}{n} = \frac{0.12}{12} = 0.01 \) (or 1%)
- Total compounding periods: \( nt = 12 \times 10 = 120 \)
- \( (1 + 0.01)^{120} = (1.01)^{120} \approx 3.30039 \)
- \( \frac{(3.30039 - 1)}{0.01} = \frac{2.30039}{0.01} = 230.039 \)
- \( FV = 5000 \times 230.039 \times 1.01 = 5000 \times 232.339 = 1,161,695 \)
Therefore, the future value (FV) of your SIP investment is approximately:
\( FV \approx \text{₹}1,161,695 \)
How to Use an PNB SIP Calculator?
Using an online SIP calculator is straightforward:
- Enter Monthly SIP Amount: Enter the fixed amount you plan to invest monthly.
- Provide Expected Annual Return Rate: Enter the estimated return percentage (e.g., 12%).
- Enter Investment Tenure: Specify the number of years you plan to invest.
- View Results: The calculator will instantly display the Total Investment, Wealth Gained, and Future Value.
Why Use an PNB SIP Calculator for Mutual Fund Investments?
SIP investments rely on the power of compounding and rupee cost averaging, making them ideal for long-term wealth creation. An SIP calculator helps you understand the impact of these benefits by giving you accurate projections.
