Understanding Adjustment Period and Adjustment Percentage
In the context of the flexible SIP (Systematic Investment Plan) calculator, the Adjustment Period and Adjustment Percentage are parameters that allow users to automatically adjust their SIP contributions over time based on a specified frequency and percentage.
Adjustment Period
Adjustment Period refers to the frequency at which the SIP amount is adjusted. It indicates the number of periods (e.g., months, quarters, weeks) after which the SIP amount will be recalculated based on the specified adjustment percentage.
For example:
If you set the adjustment period to 12 for a monthly SIP, the SIP amount will be adjusted every 12 months (i.e., once a year).
If you set the adjustment period to 4 for a quarterly SIP, the SIP amount will be adjusted every 4 quarters (i.e., once a year).
Adjustment Percentage
Adjustment Percentage specifies the percentage by which the SIP amount will be increased or decreased at each adjustment period.
For example:
If you set the adjustment percentage to 10%, the SIP amount will increase by 10% at each adjustment period.
Conversely, if you set it to -10%, the SIP amount will decrease by 10% at each adjustment period.
Practical Example
Assume you start with a default SIP amount of ₹1000 with the following parameters:
Adjustment Period: 12 (monthly frequency)
Adjustment Percentage: 10%
Here’s how the SIP amount will adjust over 3 years:
Year 1: ₹1000 per month.
Year 2: ₹1100 per month (10% increase after 12 months).
Year 3: ₹1210 per month (10% increase after another 12 months).
By defining these parameters, the calculator automates the process of adjusting the investment amounts, making it easier for users to plan their SIPs with flexibility and less manual input.