Mutual Fund Calculator

The popularity of mutual funds has skyrocketed over the last few years, with 2022 witnessing an addition of over 2 crore investor accounts. Equity schemes attracted the most traffic and saw investors putting in Rs 1.61 lakh crore in 2022.

Investors parking surplus funds in mutual funds aim to capitalise on its wealth-building opportunities to reach their investment goals. But how can you achieve this? The advent of online tools like a mutual fund calculator has eased ascertaining the right investment amount for you. Stay with us as we delve deeper into the specifics of a mutual fund calculator and how it can help ease investor dilemmas.

What is a Mutual Fund Calculator?

A mutual fund calculator is a free online tool on several websites. It offers a one-stop solution to determine your returns and display the future value of your investment. Additionally, a calculator tells you how long it might take for you to achieve your goals.

Most online calculators have three or four primary inputs to be filled in by the user.

• The amount you plan to invest monthly
• The duration for which you plan to commit to a regular investing schedule
• Expected rate of return

After accepting these responses, mutual fund calculators can help determine the estimated returns after the completion of the duration. Based on the output, you can alter your strategies or make other changes as required.

Is it Worth Using a Mutual Fund Calculator?

Mutual funds do not guarantee a consistent return, so you might often second guess if your investment plan is ideal for your long-term goals. Here’s where a calculator proves valuable.

For illustration, consider that you plan to buy a car in 5 years. Assume the car is priced at INR 10,00,000, and you can spare a monthly sum of INR 20,000.

In this hypothetical scenario, you can use a mutual fund calculator to track the following:

• The ideal amount of investment to reach your goals
• An estimated value of the returns
• Total investments made over a while

Simply enter the values of your monthly investment, time duration and goal amount. You can then reduce or increase the sum to cater to your goals while diversifying the remaining income in other avenues.

How Does a Mutual Fund Calculator Work?

Without a mutual fund calculator, you will need to rely on manual calculations to calculate the time period of your investment goals. While it is a more complex method involving a specific formula, it will give you the required answer if done correctly.

The formula differs according to the type of investment you make.

Mutual Fund Lumpsum Calculator

If you happen across a bonus or a large sum and are looking to invest it all in a single go, your investment is termed a lumpsum investment. With such investments, the goal is to let the money appreciate in nature by investing it together, albeit in different mutual fund schemes.

For lumpsum investments, the returns can be calculated using the formula given below:

• M = P (1+R/100) / n
• M = Maturity amount, which is the total value of your initial investment after the end of the specified duration
• P = Principal amount, which is the initial lump sum amount you invested
• r = Estimated rate of return, which differs according to each scheme
• n = Holding period, expressed in the number of years.

Mutual Fund SIP Calculator

Systemic investment plans, or SIPs, are a way of investment where you deposit a fixed amount after a set, pre-determined amount of time. Provided that SIPs are monthly or fortnightly, the sum invested in each SIP is significantly lower than lumpsum investments.

Due to the nature of SIPs, they are calculated using a different formula, as given below:

• M = A [ (1 + i) n – 1] x (1 + i) / i
• M = Maturity amount
• A = SIP contribution for every pre-fixed period (alter the number accordingly for daily or weekly investments)
• i = Expected/ estimated rate of return provided by the mutual fund scheme
• n = Holding period, in terms of the number of years

Advantages of Relying on a Mutual Fund Calculator

Provided every investment has an end goal, staying aware of the time to achieve these goals is vital. Hence, a mutual fund calculator is the perfect way to be more conscious of your financial goals.

Some of the advantages offered by such calculators are as follows:

Mutual fund calculators provide a simple and user-friendly interface to enable quick calculations of future returns.

Provide help on computing returns for surplus as well as monthly investments.It saves surplus time on complex calculations and simplifies understanding Facilitates targeted investments with a clear goal in mind to enable long-term wealth building.