April 19, 2024


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How to calculate mutual funds returns of your lumpsum investments

Mutual funds are investment tools in which money is pooled from a group of investors to purchase different securities. The pooled money can be invested in various financial securities like stocks, bonds, gold and money market instruments through an investment vehicle. After buying a unit in a mutual fund, you own a small stake in all the investments included in the fund. Mutual funds can be an ideal investment choice given because they are easy to use and there are numerous advantages to investing in them.

How do mutual funds work?

Once you have opted for a mutual fund, you don’t have to do anything. Asset management companies (AMCs) manage and operate mutual fund schemes. Each scheme has a specific investment objective catering to distinct investment needs. Depending on the fund’s objective, the money collected from investors is placed in various avenues such as stocks, gold, bonds and other securities. A professional known as a fund manager takes care of the funds. The main goal of a fund manager is to earn optimum returns on the fund’s investments. The revenue generated by the fund is divided and distributed among the investors proportionately. There are two types of investments. One way is SIP mode. Through a systematic investment plan, a part of your income is deducted from your bank account every month or any other date of your choice for mutual funds investment. Conversely, through a lumpsum investment, you can opt to make an independent investment in a particular scheme in a single transaction.

Is it possible to calculate lumpsum investments?

To put it simply, yes. Thanks to the internet, nowadays, it is possible to find different types of calculators for different schemes. One such calculator is a lumpsum calculator. A lumpsum investment calculator is useful in estimating the income earned by an investor on a lumpsum investment. All that needs to be done is simply fill in the necessary details and the calculator will compute an approximation of the maturity value based on the data provided.

How does a lump sum calculator work?

These are the following steps involved while using a lumpsum calculator:

  • Please select the right option:

Upon entering the website and after landing at the calculator page, there will be two options. One option will help you determine how much you need to invest to achieve your financial goals. The other option will help you to determine how much will you earn from your investment after the maturity of the mutual fund scheme.

  • Enter the amount:

After selecting the right option, you need to enter the amount in the space. However, this step is dependent on the option chosen. For example, if you have chosen the option in which you want to know how much you need to invest to reach your financial goal, you need to enter your goal. On the other hand, if you want to know how much you will make after the maturity of the mutual fund scheme, you need to enter how much you can invest in the scheme. Once this step is completed, you can proceed to the next steps which are the same regardless of the option selected.

  • Enter the number of years:

After entering the amount, you need to select the number of years you want your mutual fund scheme to attain maturity.

  • Select the expected rate of return:

In this option, you need to enter the returns you are expecting to earn from investing in the mutual fund scheme.

You can use this calculator to ascertain the estimated returns on lumpsum investment in mutual funds. A prospective investor can therefore evaluate whether a selected investment option is meeting their financial goal at the end of the investment term or not.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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