What is a Mutual Fund Calculator?
A Mutual Fund investment Calculator is an online tool that helps investors get an estimate of the value of their mutual fund investments at a specified time in future. The online Mutual Fund Calculator gives you a window to peek into what your mutual fund investments will grow to at a given rate in future.
The calculator helps you to choose the avenue of your investment such as investment through SIP or lumpsum capital. This helps to calculate the differences in the returns for both avenues, thereby helping investors choose the right way to invest in a mutual fund.
A mutual fund is a type of investment vehicle that pools money from multiple investors and uses that collective capital to purchase a diversified portfolio of stocks, bonds, or other securities. These funds are managed by professional portfolio managers who make investment decisions on behalf of the fund's investors. The primary goal of a mutual fund is to provide investors with a convenient and cost-effective way to access a diversified investment portfolio, reducing individual risk and allowing for potentially higher returns compared to investing in individual securities. Since Mutual Funds are diversified according to themes, market capitalisation and other factors, it is to be noted that the returns generated on investment will also differ depending on the scheme. Thus, it becomes important to compare these schemes and understand the risk associated with each mutual fund, to plan your investments carefully.
Since comparing various schemes involves calculating what your final investment value will grow to in each scheme, online mutual fund calculators can make investors’ lives simpler by providing quick and accurate results for the final investment value.
How does a Mutual Fund Calculator work?
A Mutual Fund Calculator works by using inputs like initial investment, rate of return, and time horizon to estimate potential profits and future values. By applying mathematical formulae, it simplifies complex financial calculations, helping investors make informed mutual fund decisions.
A Mutual Fund lumpsum Calculator functions by performing various financial calculations to help investors assess and plan their mutual fund investments. With Motilal Oswal’s newly updated Mutual Funds calculator, you can instantly get the final value of your investments in just a click.
To get an estimate of how your Mutual Fund investments will grow in the future, all you have to do is input the following given data into the calculator:
- Initial Investment Amount: This is the amount of money you are planning to invest in the mutual fund.
- Expected Rate of Return: This is an estimate of the annual growth rate you are anticipating on your mutual fund investments. To make a safe assumption regarding the expected rate of return from a mutual fund, you can look at its past CAGR over a longer term, say 3 years or more.
- Investment Duration: This indicates the period for which you plan to hold the mutual fund investment. Always remember, that the longer you stay invested in a mutual fund, the higher the returns you can generate through the magic of compounding.
While Mutual Funds are considered to be the simplest investment options available in the stock market, calculating returns over it is a complex task. The calculator takes into account all factors such as the compounding rate of interest to help investors get near-exact value of their investments. The online Mutual Fund calculator also assists in goal setting and understanding how factors like rate of return, and investment duration can impact investment outcomes. With Motilal Oswal, you also get complete assistance to choose from multiple Mutual Funds schemes to help you get better returns on your investments.
Give an example of how to calculate mutual fund returns and final investment value.
Here is a simple example of how you can calculate Mutual Fund returns and the final investment value:
Suppose you invest Rs 10,000 lumpsum in a mutual fund with an expected annual rate of return of 10%, and you plan to keep the investment for 5 years.
In this case, the Mutual Fund calculator will make use of the future value formula to derive the future value of your initial investment i.e. Rs 10,000.
The formula that the calculator uses is:-
Future Value (FV) = P * (1 + r)^n
Where:
P = Initial Investment (Principal) = 10,000 rupees
r = Annual Rate of Return (as a decimal) = 0.10 (10% converted to a decimal)
n = Number of Years = 5
Substituting the above values in the formula, we get:-
FV = 10,000 * (1 + 0.10)^5
FV = 10,000 * (1.010)^5
FV = 10,000 * 1.6105
FV ≈ 16,105 rupees
So, after 5 years, your lumpsum investment of Rs 10,000 in a mutual fund is estimated to grow to approximately Rs 16,105, given the rate of return is at a consistent 10% annually
However, certain other charges are not considered as a part of this example. These charges include AMC fees, taxes, or market fluctuations, which can affect real-world investment results. Additionally, mutual funds often provide periodic returns rather than a fixed annual rate.
What are the advantages of using a Mutual Fund Calculator?
There are multiple advantages of using a Mutual Fund investment Calculator including informed investment decisions, simplified goal planning, risk assessment, etc. The online Mutual Fund calculators provide individuals with an accurate result without the need to learn complex formulas.
Here are the elaborated advantages of the Mutual Fund lumpsum Calculator-
- Informed decisions- With the help of a Mutual Fund calculator, investors can gain valuable insights into their mutual fund investments. By providing the necessary information and setting parameters that align with their financial goals, investors can easily determine their potential returns. This information serves as a vital aspect in making well-informed investment decisions.
- Simplified goal planning- Mutual funds are frequently used by investors to plan something like buying a home, education etc. The online Mutual fund calculator enables them to align their investment with such goals. This goal-oriented strategy offers investors with clarity and motivation to work towards their dream.
- Risk Assessment- Investors often use a Mutual Fund calculator to analyse different scenarios and assess the risk involved in them. This risk evaluation is critical in assisting investors in making prudent investment decisions that are in line with their risk tolerance. Evaluating risk is important for investors to make careful investment decisions that match their risk tolerance.
- Simplifies Complex Calculations: Mutual Fund Calculators simplify the complex mathematical calculations involved in calculating the future value of investments. The online calculator automates the calculations, reducing the need for manual calculation and the risk of errors. This online calculator helps investors by saving their time in calculating their investments and also fast-tracks financial planning which helps secure a peaceful financial future.