What is a mutual fund lumpsum calculator?

What is a lumpsum calculator?

A lumpsum calculator is an online tool that tells you how much money you can make over a period of time. It's a simple way to figure out the returns on lumpsum or one-time mutual fund investments including tax saving mutual funds.

If you Google lumpsum calculator, you will get an online tool which  has a formula box to input the investment amount, the investment period in years, and the estimated annual rate of return. Within seconds, the lumpsum calculator will show you the final accumulated amount. With help of the lumpsum calculator, you can find out the estimated returns on the investments in tax saving mutual funds or the future value of it based on the investment made today at certain assumed rate of returns. 

How does lumpsum calculator work?

The lumpsum calculator is simple to use as you need to enter few necessary details and it calculates the returns and maturity amount. It helps you plan your investments better based on the estimated return that is expected at the end of the investment period. Following inputs are required in a lump sum calculator - 

The one-time investment amount you are willing to put in a mutual fund scheme.

The investment duration in years

The expected rate of return

Lumpsum calculator formula to calculate mutual funds returns

The compounding returns approach is used by the lumpsum calculator to calculate the projected return on lumpsum investment. It measures a mutual fund's yearly return over the chosen time period with the power of compounding.

The formula is as follows:

A= P (1+r/n)^nt 

A= Estimated Return

P= Present Value

r= rate of return

t= Duration of Investment

n= Number of Compounded Interest in a Year

Let us understand the concept better with the help of an example – Pradip invests Rs 150,000 in tax saving mutual funds for 5 years where expected return is 12% and it compounds annually. The estimated returns in this case would be A = 150,000 (1+12/1) ^ 1/5.

In this case, the estimated returns at the end of the tenure would be Rs 264,352.

What is the difference between lumpsum and SIP calculator?

When you Google lump sum calculator you will also come across lump sum SIP calculator.

Lump sum SIP calculator works the same way. Here you have a choice to calculate both – lumpsum and SIP returns of mutual funds. When you start using the lump sum SIP calculator, it will ask you to choose the investment option for which you want to calculate the returns, lumpsum or SIP. If you enter SIP, the additional information you have to input is frequency (for example – Monthly).

Taking forward the above example, suppose Pradip invests Rs 10,000 through monthly SIP in tax saving mutual funds for 5 years where expected return is 12% annual compounding. In this case, the estimated returns at the end of the tenure would be Rs 824,864. Pradip has invested total Rs 600,000 through 60 equal instalments of Rs 10,000 against which he got the total value of Rs 824,864 at the end of the 5 years SIP tenure.

Advantages of using lumpsum calculator and lump sum SIP calculator?

It is an easy and convenient online financial tool to calculate lumpsum and SIP returns

It enables you to plan your investments based on the estimated returns

It saves time and effort

Manual calculations are cumbersome to understand

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