SIP calculator- Calculate your savings with Direct Mutual Funds

SIP calculator- Calculate your savings with Direct Mutual Funds


SIP Calculator- Calculate Your Savings With Direct Mutual Funds

SIP calculator – Calculate your savings with Direct Mutual Funds

SIP investing has become very popular and most SIPs are held for relatively long periods of time like 15-20 years
Over these long horizons, the choice between Regular and Direct Plans can really make a massive difference.
With some reasonable assumptions, after Year 10 an investor would have paid out more from your SIP in commissions, then what you are actually putting in!
To see how the difference in expense ratio between Regular Plans and Direct Plans translates into actual rupees in the case of SIPs consider the following example. This example has a few reasonable assumptions, but we later discuss how changing these assumptions would affect the results

Assumptions:

1. It is a monthly SIP i.e. where new investments are made every month;
2. Amount invested per month: 20,000;
3. Pre-cost returns of the fund: 10%;
4. Regular plan expense ratio: 2%;
5. Direct plan expense ratio: 1%.
6. So post-cost returns of the fund will be 8% and 9% for the Regular and Direct plans respectively. Also we will assume that returns are
7. uniformly distributed in the year, so
8. Regular Plan returns are 8%/12 = 0.67% every month
9. Direct Plan returns are 9%/12 = 0.75% every month.

Table 1: SIP returns under direct and regular plans (20 years):

YearMonth NumberInvestment amount in Regular PlanInvestment amount in Direct PlanExtra returns with Direct Plan (Rs)Extra returns as a % of annual investment (2.4 lakhs)
Year1Month120,00020,000
.Month220,000*(1+0.67%) + 20,000 = 40,13320,000*(1+0.75%) + 20,000 = 40,15017
.Month340,133*(1+0.67%) + 20,000 = 60,40140,150*(1+0.75%) + 20,000 = 60,45150
.Month480,804101
.Month51,01,3421,01,511169
.Month61,22,0181,22,273255
.Month 71,42,8311,43,190358
.Month 81,63,7841,64,264480
.Month 91,84,8751,85,496620
.Month 102,06,1082,06,887779
.Month 112,27,4822,28,438956
.Month 122,48,9992,50,1521,1530%
Year 2Month 245,18,6645,23,7695,1062%
Year 3Month 368,10,7118,23,05412,3435%
Year 4Month 4811,26,99811,50,41423,41610%
Year 5Month 6014,69,53715,08,48338,94616%
Year 6Month 7218,40,50719,00,14159,63425%
Year 7Month 8422,42,26623,28,53986,27236%
Year 8Month 9626,77,37227,97,1231,19,75250%
Year 9Month 10831,48,59133,09,6641,61,07467%
Year 10Month 12036,58,92138,70,2862,11,36588%
Year 11Month 13242,11,60844,83,4972,71,889113%
Year 12Month 14448,10,16851,54,2313,44,064143%
Year 13Month 15654,58,40858,87,8864,29,478179%
Year 14Month 16861,60,45166,90,3625,29,910221%
Year 15Month 18069,20,76475,68,1156,47,351270%
Year 16Month 19277,44,18385,28,2097,84,026327%
Year 17Month 20486,35,94595,78,3659,42,420393%
Year 18Month 21696,01,7231,07,27,03311,25,311469%
Year 19Month 2281,06,47,6591,19,83,45513,35,796557%
Year 20Month 2401,17,80,4081,33,57,73715,77,329657%
YearMonth NumberInvestment amount in Regular PlanInvestment amount in Direct PlanExtra returns with Direct Plan (Rs)Extra returns as a % of annual investment (2.4 lakhs)
Year 1Month 120,00020,000
.Month 2= 20,000*(1+0.67%) + 20,000 = 40,133= 20,000*(1+0.75%) + 20,000 = 40,15017
.Month 3= 40,133*(1+0.67%) + 20,000 = 60,401= 40,150*(1+0.75%) + 20,000 = 60,45150
.Month 480,80480,905101
.Month 51,01,3421,01,511169
.Month 61,22,0181,22,273255
.Month 71,42,8311,43,190358
.Month 81,63,7841,64,264480
.Month 91,84,8751,85,496620
.Month 102,06,1082,06,887779
.Month 112,27,4822,28,438956
.Month 122,48,9992,50,1521,1530%
Year 2Month 245,18,6645,23,7695,1062%
Year 3Month 368,10,7118,23,05412,3435%
Year 4Month 4811,26,99811,50,41423,41610%
Year 5Month 6014,69,53715,08,48338,94616%
Year 6Month 7218,40,50719,00,14159,63425%
Year 7Month 8422,42,26623,28,53986,27236%
Year 8Month 9626,77,37227,97,1231,19,75250%
Year 9Month 10831,48,59133,09,6641,61,07467%
Year 10Month 12036,58,92138,70,2862,11,36588%
Year 11Month 13242,11,60844,83,4972,71,889113%
Year 12Month 14448,10,16851,54,2313,44,064143%
Year 13Month 15654,58,40858,87,8864,29,478179%
Year 14Month 16861,60,45166,90,3625,29,910221%
Year 15Month 18069,20,76475,68,1156,47,351270%
Year 16Month 19277,44,18385,28,2097,84,026327%
Year 17Month 20486,35,94595,78,3659,42,420393%
Year 18Month 21696,01,7231,07,27,03311,25,311469%
Year 19Month 2281,06,47,6591,19,83,45513,35,796557%
Year 20Month 2401,17,80,4081,33,57,73715,77,329657%

Source: Oro Wealth
As you can see the extra returns that you make with Direct Plans keeps increasing over the years, because the extra costs of Regular Plans is applied over the total investment corpus. In fact from Year 11 onwards you are losing more money from your SIP on account of being in the Regular Plan than you are actually putting in every year!

How will these numbers change with assumptions?

1. Investment amount per month: If you are investing more per month, then you will also lose more in rupee terms on account of being in the Regular Plan. However the percentage numbers will remain constant.

2. Pre-cost returns of the fund: We have taken a very conservative number of 10% here. If your assumption on pre-cost returns is higher, then the gap between Regular and Direct plans will increase further. This is because if investments can earn higher returns, then the fact that your agent is taking away a part of your investment amount will also hurt more.

3. Difference in Direct and Regular expense ratio: Rupee figures will increase/decrease if this gap is higher/lower. You can see the actual difference for different funds using the interactive graphic on our homepage: www.orowealth.com

Created by Orowealth.com
Piyush Wadhwa
user@example.com
2 Comments
  • Unknown
    Posted at 16:29h, 06 May Reply

    Good explanation and awareness

  • Mueeid Khan
    Posted at 06:36h, 08 November Reply

    Financial and business calculators are designed to be used mainly in calculating business-related equations, for students studying business calculus, and for tracking or plotting financial information. guarantor loans

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