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The easiest way to invest in mutual funds is through SIP. We also call it a Systematic Investment Plan. Through SIP, you can invest money in installments. You can create a big fund for the future by investing a small amount.

Today, with the help of SIP Calculation, we understand how much time it will take to create a fund of 20 lakhs from a monthly SIP of Rs 5000.

Calculation
Investment amount - Rs 5000 per month
Return - 12 percent
If an investor invests Rs 5000 every month in mutual funds through SIP, then at the rate of 12 percent, it will take them 13 to 14 years to create a fund of 20 lakhs.

In 13 years, you will create a fund of Rs 18,80,000 as per a 12 percent return. At the same time, in 14 years, at the rate of 12 percent return, you will get Rs 21,82,000 on maturity.

Before choosing any fund, you should assess the risk.

How to find out the risk?

Beta
If this benchmark is less than 1, then the fund you have chosen is low risk. On the other hand, if there is more than one, then it is considered risky.

Standard Deviation
When we compare any two funds, the standard deviation is seen. The lower its percentage, the less risky the fund is considered. Suppose the standard deviation of one fund is 5 percent and that of the other is 10 percent; then the first fund will be less risky.

Sharpe Ratio
Through the Sharpe Ratio, you can easily find out the risk in a mutual fund. If the Sharpe Ratio is less than 1.00, then the risk will be less. If the Sharpe Ratio is between 1.00 and 1.99, then the risk will be normal. Similarly, if the Sharpe ratio is 2.00 to 2.99, then the risk will be very high.

If the Sharpe ratio is more than 3, then the risk in such a fund is very high.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.