If you wish to invest in mutual funds, you can do it in two ways – SIP (Systematic Investment Plan) or lumpsum investment. Though the internet is filled with SIP investments and how to use a SIP calculator to understand the returns on your mutual fund investments, not much is covered about lumpsum investments. This article aims at serving as a lumpsum mutual fund guide. Read on to know more about lumpsum investments in mutual funds.
A lump sum investment is when an investor decides to invest the entire investment amount in one go. Just like a SIP calculator, a mutual fund lumpsum calculator helps to estimate the returns on mutual fund investments over a period of time.
Advantages of the Lumpsum Calculator
Following are some of the benefits of using a mutual funds lumpsum calculator:
- A lumpsum investment calculator provides reasonably precise returns on your mutual fund investments. However, an investor should note that as investments in mutual funds are subject to market risks, you cannot predict the returns with absolute pinpoint accuracy.
- It aids investors in planning and managing their finances better after they have a predicted estimation of the future value of their investments. This also helps them comprehend if their financial goals can be achieved or not.
- Using a mutual funds lumpsum calculator saves time by avoiding manual calculations and also helps in dodging human errors.
- Mutual fund return calculators are quite easy and convenient to use. Anyone can use it with relative ease.
How to use a lumpsum calculator?
A lumpsum investment calculator is effortless to use. It generally has three input boxes. These are:
- Monthly investment amount
- Investment duration
- Expected annual returns
Enter the amount you wish to invest via lumpsum investment. Next, input the duration for which you are planning to stay invested such as five years, eight years, ten years, and so on. Though lumpsum investments do not have any lock-in tenure, mutual fund experts often counsel investors to stay invested for a prolonged duration in order to achieve optimum wealth appreciation. Lastly, input the expected rate of return on your mutual fund investment.
Once you have typed these values correctly, click on the calculate button to evaluate the expected value of your investments over a period of time by investing via lumpsum. Some lumpsum calculators also include an added feature – ‘Adjust for Inflation’ button. You can click on this button to know the actual value of your mutual fund investments in the future after taking inflation into account. It is always recommended to factor inflation as it offers a more realistic perspective on your future earnings.
Investing in mutual funds is usually upon the discretion of the investor. The type of investor, risky, averse, or moderate outlines the type of investment that should be held. Whether you decide to move forward with SIP investments or lumpsum investments entirely depends on your risk profile, investment horizon, and financial goals. Happy investing!