SIP interest rate calculation is the most lucrative factor about it

SIP or systematic Investment Plan mutual funds are the new sensation in the financial investment market. For common man it is a good way to make a huge profit in short term and with small but regular investments. But for any enthusiastic person SIP is a scientific and calculative process that starts with a small amount and ends up in a huge number. It is the safest and easiest way for any common man even a newbie to grow his wealth in limited time period. The principle to grow your wealth is to start investing as soon as possible. 

To avail the total advantage of SIP interest rate calculation it is something you should have a clear idea about. There are many terminologies you need to know as they are the determining factor of the profit. But interest calculation is what ensures the profit of your investment. Though in common terms the interest rate of SIP is calculated in compound interest calculation method still it is quite complex for many. The most important part is what drives the interest rate of any SIP. You need to have a clear idea about these driving parameters before you start your investment.

Driving parameters of SIP interest rate

Parameters which influence the interest rate of SIP and also get influenced by SIP are explained here:

  • The fund performance in last couple of years and the brand equity are the much talked about influencing parameter for SIP in the market. 
  • The AMU of the funds is another important parameter for this. If it is more than 1000cr then it is bankable. 
  • People mostly prefer tax saving mid-cap funds as they have a good interest rate besides tax redemption.
  • Expense ratio is something you need to consider as an important parameter. 
  • So does the information ratio. 
  • ALPHA is also important about the interest rate of SIP. The more the ALPHA is the better interest rate will be. 
  • The quality of the mutual fund you want is also important in this list. If you like to avoid risk than go for a mid-risk fund though you have to settle with medium level interest rate.

But the popularity of SIPs lies in the easiness of getting a policy approved. It is far simpler than gathering all the information. Also a good result with a small investment is added benefit. As the popularity increases the investment in SIP increases giving a rise to the interest rates.