It is normal for first-time mutual fund investors to feel sceptical about choosing among different schemes and investment modes.

If you are one of them and considering a lumpsum investment, a lumpsum calculator can greatly help. It can lend you a clear perspective on your investment plan and ensures efficient financial management.

How, you ask?

You need to go through our detailed guide on the intrinsic of this online tool to understand that.

Let’s begin!

A lumpsum investment calculator is an online tool that helps individuals get an idea of the maturity value of their lumpsum mutual fund investment.

Lumpsum investment is one of the 2 ways of allocating wealth via mutual funds. In this process, individuals invest the entire amount at one go for a specific period. This investment method involves lesser variable factors affecting returns. Plus, individuals seeking higher returns over a longer time period tend to prefer this route more.

An online tool like a lumpsum return calculator makes it easy for individuals to predict the total possible returns they can enjoy against their investment.

If you are wondering how exactly this online tool works to produce such accurate results, we’ve got you covered!

A lumpsum calculator produces outputs based on an individual’s investment details, and includes investment sum, period, and expected return rate. This online tool provides particular fields to let users enter these values.

Thereafter, this tool substitutes these values in the lumpsum calculator formula to yield results. This formula can be represented as follows:

A = P x {1+ (i/n)}nt

Where, 

A = Final value after maturity

P = Investment amount

i = Expected rate of return

n = Number of compounded interests per annum

t = Total investment period

 

After using this lumpsum calculation formula, the online tool will display results for estimated future value and wealth gain.

For example, you wish to invest ₹12 lakhs for 10 years at a 12% return rate compounded annually. In that case, you will earn a total of ₹37,27,018 approximately. Hence, your probable wealth gain will be ₹25,27,018.

Now, you might wonder why this amount predicted by a lumpsum calculator is called approximate. This is because such an online tool does not consider factors like exit load and expense ratio.

Your final net return will heavily depend on these factors. This is why your actual final value might not be exactly similar to this calculator’s result.

Now that you know how this online tool works, you must also understand how to use one.

Here is a step-by-step guide on how to derive your desired results using this online calculator.

• Step 1: Visit your chosen fund management company’s official website. Navigate to the option for lumpsum calculator.
• Step 2: Type in your preferred investment amount.
• Step 3: Enter the total period for which you want to invest.
• Step 4: Choose your expected rate of return.
• Step 5: Hit the “Calculate” button.

Upon completing the above procedure, the calculator will show you results for the following.

• Total amount invested
• Final return value
• Total wealth gain

These results can serve investors a number of uses in their financial decision-making.

A lumpsum calculator uses your provided details to compute estimated investment results. Having an idea of your probable returns can help you align your investment with your financial goals. You can also adjust your investment conditions to arrive at your most suitable results.

This way, individuals can use a lumpsum returns calculator to develop a better financial understanding without extensive knowledge of market conditions and strategies. This can help investors exercise better financial management.

In addition, there are several other pros of a lumpsum calculator.

Here are some of the ways in which investors can benefit from a lumpsum calculator. Have a look.

• Speedy and correct results: One of the major benefits of a lumpsum calculator is its speed and accuracy. Although you can use the given formula to perform manual calculations, it will be time-consuming. At the same time, there is always room for errors as well. With an online calculator, you can get accurate results within seconds.
• User-friendly interface: You only need to enter a few simple details, as previously discussed. The online tool does the rest of the work. This facilitates extremely easy usage.
• Availability: This online tool is available on the websites of almost every AMC and even other financial websites.
• Cost-free: Websites do not charge any fee to use these calculators. Therefore, you can easily visit one of these portals to use this tool at your convenience.

You can use this online calculator anywhere at any time to check the required results. Plus, you can use this tool to instantly compare outcomes from different fund schemes and choose the most suitable one.

An important thing to consider besides the scheme type is the mode of investment. As previously discussed, lumpsum is one of the 2 ways to invest in mutual funds. The other route is the Systematic Investment Plan (SIP). In case you are confused between the two, you can use a SIP calculator to compare investment returns.

Both of the investment modes, lumpsum and SIP, come with their separate pros and cons. If you are an existing mutual fund investor, you might already know the difference between the two. However, there is a basic computing difference between a lumpsum calculator and a SIP calculator as well.

The former calculates the total maturity amount at the end of the investment period based on a one-time investment. The return rate, here, is compounded periodically on the one-time investment year after year. Investing via lumpsum also saves much time and effort for investors since they do not need to engage themselves in periodical investments constantly.

A SIP calculator, on the other hand, calculates expected returns only for the period for which you have invested. Here the period (monthly, quarterly, etc.) investment amount is considered, and the return rate is applied on each cycle accordingly. 

If you want to know in detail about online SIP calculators, we have a separate discourse on that. You can check that out.

However, if you are keen on opting for lumpsum investment, do not forget to use a lumpsum calculator to predict your future earnings beforehand.