Mutual funds in India have grown in popularity because of their intrinsic nature to target several investors sharing a common investment objective. They also allow individuals to invest in equities, bonds,
and other money market instruments or/and securities. The income generated from these collective investment instruments is then distributed proportionately in the form of returns amongst the investors (after the deduction
of certain expenses).
To many people, mutual fund investments seem like a simpler way to start their journey as an investor. If you want to invest money in mutual funds, you should know that you can choose either a Systematic
(SIP) or the lumpsum route. Before we move toward the lumpsum calculator part to help you analyse expected returns, let’s understand these two investment approaches in brief.
- Under the lumpsum investments approach, you choose to invest a certain sum in a single transaction. It is preferred by both experienced and beginner investors who are quite dependent on the appreciation of the value
of stocks in their portfolios to create wealth. If you have a considerable risk appetite and a sizeable amount, you can use this
mutual fund investment approach.
- With SIP investments, you invest a certain amount in the preferred mutual fund scheme at regular intervals. While the periodicity in SIP can be daily, weekly, monthly, quarterly, or
annually, you can invest as low as Rs. 500 at a time. This is highly suitable for building a financial discipline.
Irrespective of the approach you choose, you would want to get an idea of the returns you can expect from the amount you invest during a specific period. This is where online investment calculators can help you out. Here,
we will cover the usage of the lumpsum calculator in detail.
What is a Lumpsum Calculator?
A lumpsum calculator is an online tool that can help you compute the estimated future value of your mutual fund
investments- for the expected rate of return.
An online lumpsum mutual fund calculator will ask you to enter:
- The amount to be invested
- Duration of the investment (in years)
- Expected rate of return per annum
For example, if you invest Rs. 1 Lakh for 30 years with an expectation of returns at the rate of 12% per annum, you will get an estimated return of Rs. 28,95,992.
How Can a Lumpsum Calculator Help You?
As a mutual fund investor, you can use a lump sum return
calculator to figure out the estimated returns from your one- time investment. Some of the benefits of using a lumpsum investment calculator are as follows:
- It can help you plan and manage your finances better to make room for the required investments for the fulfillment of various life goals.
- Using a lumpsum calculator is much better than spending time calculating returns manually. It also helps avoid human errors that can make you set unrealistic expectations otherwise.
- This calculator can also help you understand whether you can reach certain financial goals within a specific period based on your financial profile.
- It can also be used to compare different mutual fund schemes in terms of the returns you can expect. You can then select the one that meets your financial needs.
- Irrespective of your experience of investing in mutual fund schemes, you can easily use a
Being an investor, you should keep in mind that it is difficult to predict the returns with high accuracy because of the market-related risks, whether you use a lump sum calculator or not.
Formula to Calculate MF Returns
Although the value of your investments depends on market conditions, all lumpsum investment
calculators use a specific formula to compute the return on an investment amount. At its core, the formula is related to the compound interest calculation, which covers how many times the interest is compounded in a year.
Here is the formula on which this calculator is based:
A = P (1 + r/n) ^ nt
Where A = Estimated return value or maturity value of your investment
P = Present value or the amount you invest
r = Estimated rate of return in percentage
t = Duration or investment period (in years)
n = number of times the interest is compounded in twelve months
Let’s consider an example to check how this formula works:
You want to invest Rs. 50,000 in a mutual fund scheme for seven years in which the interest is assumed to be compounded annually. If you are expecting this scheme to deliver returns at the rate of 12% per annum, the estimated
return after seven years will be:
A = 50,000 (1 + 12) ^ 7 = Rs. 1,10,535
As you can see here, using this complicated formula manually to calculate expected returns can be challenging for many. This is where an MF lumpsum calculator can come to your rescue. You can use the Nippon Lumpsum Calculator
to simplify this task. You can also change the value of terms (P, r, t, and n) to check how the returns would vary for different schemes.
How to Use the Nippon Lumpsum Calculator?
Nippon Lumpsum Calculator is a highly recommended online tool that can help you compute the future value of your lumpsum investment in a few seconds. All you need to enter is the investment duration, investment
amount, and expected rate of returns.
Follow the steps given below to use the Nippon Lump sum Calculator:
- Choose the amount you want to invest
- Enter the duration for which you want to stay invested (for example - 10 years from the date of investment)
- Based on your investment strategy, which can be either conservative or reactive, you can choose to invest the amount as per estimated returns* calculated.