Apart from saving funds, financial planning requires a clear insight into how much, where, and when to invest. For investors who invest through Systematic Investment Plan (SIP), two online tools can be helpful, i.e, the SIP return calculator and the goal planner. While both tools assist in making informed choices, they have different purposes. Understanding the difference between the two can help you use them efficiently in your investment journey. This article explains the difference between the SIP return calculator and the goal planner.
What is the SIP Return Calculator?
A SIP return calculator is a tool used to determine investment values for a given time. Based on the inputs such as, monthly instalments, investment tenure, and expected annual rate of return, it is simple to calculate the estimated corpus.
It assists with:
- Assessing the growth potential of your SIP throughout the investment.
- Adjust the investment amount to meet your target amount.
- Understanding how small changes in the contribution or the tenure influence the outcome.
Understanding Goal Planner
A goal planner has a broader approach. It starts by understanding your financial goals, say buying a house, funding education, or building a retirement corpus, and then works backwards to calculate the sum that has to be invested through SIPs.
You have to enter values like:
- Target amount .
- Deadline to meet the target.
- Anticipated rate of return.
- Available savings, if any.
This tool aligns one’s investment plan with one’s life objectives, rather than only projecting gains.
Major Differences between the Goal Planner and the SIP Return Calculator
Even though both tools are useful, they have different uses. This table explains the differences in detail.
| SIP Return Calculator | Goal Planner |
| It calculates the maturity amount of your existing or planned SIP investment. | Helps one plan their investments to attain a specific financial goal within a given time period. |
| Calculation starts with the investment information you enter, such as the amount and the tenure. | Calculation starts from the target goal and works back to compute the required investment. |
| It helps to calculate investment amount, term, or expected returns and show how they affect the maturity value. | Adjusts investment amount, term, or expected returns but aligns them with the goal’s requirements. |
| Calculate the total corpus based on the inputs you provide. | Calculate the monthly amount of SIP required to reach your goal. |
When to Use a SIP Return Calculator
A SIP return calculator is used effectively when you want to monitor the growth of an existing SIP investment or estimating how a new investment might grow. Furthermore, it can be used in these scenarios.
- Comparing different investment tenures.
- Calculating the effect of consistently increasing monthly SIP investments.
When to Use a Goal Planner
A goal planner can be appropriate in situations where one has a specific goal and a time frame. It is appropriate for:
- Budgeting for education costs.
- Creating a retirement savings plan.
- Financing big purchases such as a car or a home.
- This ensures that your investments are aligned with your goals.
Utilising Both Tools Together
Though they work differently, they can together provide you with a complete understanding of your investment plan. You can start with a goal planner to determine the investment required, and then a SIP return calculator to track progress after a period of time. This ensures that your investment plan is adaptive to the changing market conditions.
Benefits of Understanding the Difference Between These Tools
Identifying the difference between the two tools can help you to:
- Avoid misalignment with goals and investments.
- Ensure you are not overestimating or underestimating your future corpus.
- Provide clarity on your investment’s growth rate during your investment.
Mistakes to Avoid While Using These Tools
When utilising tools like the SIP return calculator and goal planner, make sure to avoid these mistakes.
- For SIP Return Calculator: Inputting an overestimated rate of return or not adjusting results for current inflation may lead to incorrect projections.
- For Goal Planner: Setting a goal amount that may requires monthly contributions higher than your budget allows.
Conclusion
The SIP return calculator and goal planner are two separate tools that serve different functions in a financial planning. The SIP return calculator, which is available on multiple websites, including Axis MF, provides you with an estimate of the potential growth of your investments. The goal planner, on the other hand, ensures that the investments you are making are tailored to specific financial goals. By incorporating both of these tools, you can draft a plan that is focused on growth and goals and increases the likelihood of achieving longer-term financial goals with discipline and accuracy.
