How Often To Review SIPs? Let a Calculator Help

Reviewing the systematic investment plan or SIP amount from time to time is vital to ensure that individuals remain on track to achieve their financial goals. That said, revisiting the amount every day is unnecessary and does not reveal any useful information. Rather, it may increase one’s worries due to market fluctuations. Nevertheless, not reviewing the SIP investment strategy also does not work because one cannot stay aware of whether the SIPs are in line with their financial goals. 

If you are wondering how often to review SIPs, you are in the right place. In this article, we’ll discuss when to check the amount. Moreover, we’ll look into how you can utilize an SIP calculator to check whether the amount you allocate to a fund at regular intervals requires a revision. Before we discuss how such an online tool can guide you, let us understand why the amount needs a review in detail. 

Generally, in different phases of life, individuals have distinct financial goals. For instance, individuals aged between 18 and 22 might want to accumulate funds to purchase a fancy motorcycle. On the other hand, a person who is above 30 might have a goal to accumulate a corpus to fund the purchase of a new home. 

When financial objectives vary over time, the SIP amount needs to be subject to change as well. Indeed, individuals must revise their SIP investment strategy to leverage the power of compounding and keep up with the changing financial goals. 

Besides financial goals, another key factor that individuals must consider for managing SIP investments is risk appetite. If the market fluctuations make individuals anxious, they should consider lowering the SIP amount temporarily. On the other hand, people with a high risk appetite might want to raise the SIP amounts during unfavorable economic scenarios to purchase additional units of a fund by paying lower prices. Another factor one can take into account to determine whether the SIP amount requires a revisit is the investment time horizon. For instance, when individuals are close to achieving their goal, they may consider lowering the SIP amount and reallocating the funds to safer investment options. 

Utilizing an SIP calculator can provide a rudimentary idea regarding the anticipated corpus over a certain duration against the SIP amount. Simply put, this tool helps calculate the estimated returns for a specific timeframe. Note that it does not give any clarification regarding the expense ratio or exit load of the fund (if applicable). The tool works via a set algorithm that computes the results based on the data provided by the investor.

If you utilize such a calculator at regular intervals, you can determine whether to increase or decrease the SIP amount to fulfill your predetermined financial goals. 

Let us look at the steps can choose to follow to use an SIP review calculator. 

1. Enter the target amount, i.e., the amount you wish to accumulate by investing via a systematic investment plan. 
2. Insert the duration for which you wish to run the SIP. For example, it can be 3 years, 5 years, etc. 
3. Next, enter the return rate that you expect the investment to generate.

Once you provide the above details, the calculator will show the SIP amount required.  One must make sure that they keep their return expectations rational. Only then, an SIP review calculator can provide the right guidance. 

Note that there are other calculators that require individuals to enter the expected rate, duration, and the SIP amount (based on an assumption). Once all the details are provided, the calculator provides the estimated future value and the projected returns. In this case, they can alter the SIP amount and check the predicted returns to get an idea of what the ideal amount should be to reach their goal. 

With time, if financial goals, market conditions, or risk appetite change, you can enter the updated duration, expected return, and SIP amount/target amount into the calculator to compute the revised SIP amount necessary to fulfill your financial goals. 

For individuals looking to know how often to review SIPs, it is vital to know that there is no standard rule that defines when a person must review their SIP amount. That said, experts suggest that one should consider reviewing the performance of their long-term investments at least once every year or semi-annually. On the other hand, individuals should consider carrying out reviews more frequently in the case of short-term and medium-term investments. 

A periodic review of the amount invested can help individuals understand whether they are on track to fulfill their investment objectives or not. Also, individuals must keep in mind that if their investment has been performing below expectations for a long period, they may even consider selling their holdings. Note that making investment decisions can be quite tricky, especially for beginners. If individuals are unsure, they should consider opting for the services of a financial advisor. 

Let us understand via these pointers how small changes in the SIP amount from time to time can make a difference and help investors in achieving their financial goals:

• SIPs provide the benefit of compounding. Raising the amount can allow investors to make the most of this advantage. 
• As income increases or decreases with time, one can consider adjusting the SIP amount accordingly to align the SIP with their financial goals and risk appetite. Thus, if you’re thinking about how often to review SIPs, considering a revision of the amount every time you get a hike can be a wise move. 
• Inflation can have a negative impact on one’s investments. Especially, the investments generating fixed returns are impacted the most. An individual can revise their SIP amount from time to time to mitigate the impact of inflation and achieve their financial goals. 

Investing via SIP can be a great way to build wealth over time by leveraging the benefits of compounding and dollar cost averaging. Having said that, various factors, like inflation, varying interest rates, global developments, etc., make it necessary to revise the SIP amount periodically. Once you fully understand how often to review SIPs, make sure to follow the steps above to use an SIP calculator and figure out how you should adjust the SIP amount to align your risk appetite, financial goals, and income.