Mutual Fund Investments are categorised into Lumpsum and Systematic Investment Plan. Lumpsum Investments are where the investor invests a chunk of money in a specific Mutual Fund scheme. SIPs, on the other hand, include investments in smaller amounts at regular intervals, be it monthly, quarterly, half-yearly, or annually. Both these Mutual Fund categories have their benefits. Investors specifically prefer Lumpsum Investments.
This is because it involves lesser variables, and returns are on the higher side. To find out the estimated returns on your Lumpsum Investment, you can use the Lumpsum Calculator.
How Does it Help?
Investors use this tool to check the estimated returns on their investments. Before understanding the benefits of using the calculator, be aware of the different returns you earn through Lumpsum Investment:
- Absolute
- Total
- Annualised
- Point-to-point
- Trailing
- Rolling
Now, let us learn about the benefits:
- The Mutual Fund Lumpsum Calculator computes estimated returns for the entire investment period. This could range from a year to three to five years.
- It is highly convenient and easy to use.
- It provides reasonably accurate results. However, Mutual Fund Investment is subject to market risks and cannot be predicted with accuracy.
- It allows the investors to plan their finances better based on the estimated returns they are likely to receive by the end of the term.
The formula for Calculating Returns
The calculator uses a particular formula for deriving the estimated results. It is a compound interest formula, with one of the variables being the number of times the interest gets compounded in a year. It is as follows:
A = P (1+r/n) ^ nt
Where,
A = approximate returns
P = present value
R = return rate
T = investment duration
N = Compounded interests in a year
Use this formula to compute Mutual Funds returns. For instance, if you invest Rs. 15 lakh in a scheme that is expected to offer 12% returns for five years, compounding every six months. The approximate profit scenario would be:
A = 15,00,000 (1 + 12%) ^ 5
Although it looks complicated, the calculator computes it instantly. In this case, the returns would be around Rs. 26,43,513 for five years.
Generally, the calculator is available on the fund houses’ website or app. You only need to add all the desired variables. You could use the slider to adjust the values. Then, the calculator calculates the results within minutes.
Importance
- Mutual Fund returns cannot be calculated accurately as they are subject to market risks. However, the calculator ensures you get the closest possible accurate outcome.
- Considering it is an online tool, you can use it anytime. It eliminates space and time constraints.
- It saves effort as manual calculations take hours.
Lumpsum Investments are currently availed widely. They have a time-proven history of yielding the highest returns. Start with a small amount and increase them once you are in a better position financially and are comfortable with the Mutual Fund process.
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