Mutual funds are the schemes that provide the chance for small investors to invest in them and get a unit that will have combined stocks, bonds, or other instruments. In this article, we’ve covered how a mutual fund calculator is a helpful tool in making investment plans.
How to use a mutual fund calculator?
Mutual funds provide a way to invest through two methods: the SIP and lump sum methods, where SIP means in regular installments and lump sum means a single investment at a time. But even while strategizing an investment, you are curious to know how much return you can earn from both these methods in any mutual fund.
- SIP calculator
By selecting the SIP in a mutual fund calculator, you have to enter the details of the monthly investment, investment period, and expected return. The calculator will provide the results of the invested amount, wealth gained, and expected amount.
2. Lumpsum calculator
You can also use the mutual fund calculator for lump-sum investments. You have to enter the details of the initial investment, investment period, and expected return. The calculator will provide the same results in a similar way as the SIP calculator.
For example, suppose you are considering a mutual fund that has a minimum SIP of ₹300 and a lump sum amount of ₹10,000. It will provide an average annual interest rate of 11% during the lock-in period of three years. Let’s see how the results came out for both the SIP and lump sum methods by entering the given information in the required field.
- The results shown by a SIP calculator are that the total invested amount will be ₹10,800, the wealth gained will be ₹ 2,044 and the total expected amount after three years will be ₹12,844.
- The results shown by a lump sum calculator are that the total invested amount will be ₹10,000, the wealth gained after three years will be ₹3,676 and the total expected amount will be ₹13,676.
Importance of a mutual fund calculator
- Compare different options: You can use a mutual fund calculator to compare different mutual fund options and choose the one that matches your investment profile.
- Estimate the wealth gained: You can use a mutual fund calculator to calculate the total wealth that can be gained from any mutual fund scheme in advance, in both SIPs and lump sums.
- Ease of use: It is available free of cost on the internet and does not require any prior finance knowledge to understand its usage and its results.
- Provides flexibility: It provides the much-needed flexibility to change the input fields as many times as you want.
- Graphical representation: It provides the results in a graphical way to help you understand how your money will grow over time.
- Provides schedule: It also provides a schedule that will help in knowing how much return and wealth can be gained from any mutual fund investment each year.
Conclusion
Therefore, a mutual fund calculator is a tool that can help you easily make investment plans based on the money you have today and how much you want to earn in the future. Also, it will help in deciding the best way to invest your money in mutual funds, either through a SIP, a lump sum, or both.