Mutual fund investments offer a variety of choices to investors, in terms of the kind of fund to invest in, such as debt, equity, or hybrid, etc., the tenure for investment, and how they want to invest – SIP or Lumpsum. Both are popular methods of making mutual fund investments. An individual can choose mutual fund schemes based on their need, income stream, frequency of payments and financial goals, etc.
We all are aware that SIP means periodic investments in a chosen fund, over a period of time. The amount can start from Rs. 500 and there is no upper limit. Now, let us understand the lumpsum method and its supporting tools such as the lumpsum calculator. In the case of lumpsum investing, the investor has to make a one-time investment in a chosen mutual fund which can be an equity or debt fund. Once they have invested, the amount remains there and grows or falls with the market movements. Every investor has a definite goal in mind, such as a wedding, child education, foreign education, buying a house, etc., when they start the investments.
The choice of mutual funds here also depends on the long-term historical performance of the scheme. To know the performance of lumpsum investment of a mutual fund scheme, one can check the mutual fund NAV of the day they invested and the NAV now. The difference in the NAV is the absolute return. Let us find an absolute return – say the purchase NAV was Rs 10 and the current mutual fund NAV is Rs 15, and the absolute return is 50%.
In order to understand how much would be the future value of your investment, you can enter the investment amount (Say Rs 2 Lakhs), expected return (say 10%) and the time horizon (say 10 years), in a lumpsum calculator, the calculator will flash within seconds the future value as Rs 518,749 (Source:Advisorkhoj.com). As you can see, how easy it is to plan your lumpsum investment in mutual funds.
Another example of mutual fund lumpsum investment could be for meeting a future goal. How to plan for that by making a one-time investment? For example – your goal amount is 75 Lakhs, the time period is 20 years and you expect at least 12% return – then, how much to invest? Once you enter the above in a lumpsum calculator, it will tell you to invest a one-time Rs 7,77,500. As you can see, how the calculator helps you plan your mutual fund investments.
We now understand the relevance of using a lumpsum calculator for making a mutual fund investment. But while searching on the internet, we may come across more calculators, like lumpsum SIP calculator, SIP lumpsum calculator, etc. Please be mindful of which one to use for what purpose based on the investment nature.
A lumpsum calculator eliminates the possibility of making a human error and saves time from making manual calculations. SIP and lumpsum investments, as you know, are completely different forms of investments, therefore, you need to be careful which calculator you are using.
Mutual funds are great investment products. Use a lumpsum calculator to estimate your one-time investments or plan for a future financial goal.