Mutual funds are professionally managed investment schemes managed by asset management companies (AMCs). The AMC collects funds from investors and invests the money in equity, money market instruments, Equity Linked Savings Scheme (ELSS), bonds, and other investment options. Investors receive NAV units proportionate to the amount of their investment in the mutual fund. Each investor shares the loss or gain from the mutual fund scheme as per their investment percentage. If you plan to invest in mutual funds, an MF calculator helps calculate the returns and make goal-based investing. Let’s discuss this aspect in detail.
MF calculator stands for mutual fund calculator, an online tool to calculate returns from a mutual fund scheme. Whether you invest in a mutual fund in a lump sum or through SIP, you can easily calculate the returns using an online mutual fund calculator.
By entering the investment amount, investment tenure, and interest rate, you can estimate the potential returns and plan your finances aligned with your financial goals. In the case of SIP investments, you need to enter details like the SIP amount, frequency, duration, and estimated return rate. The tool requires details like the total investment amount, investment duration, and expected return rate for lump sum MF investments. The information from a calculator provides a clear picture of the final returns and maturity amount.
An MF calculator is an incredible online tool that estimates the future value of your mutual fund investment to ease your financial planning process. Based on various factors like your investment amount, period, and returns, it estimates your investment's future value. Eventually, you can decide whether the returns are sufficient to achieve your goals: buy a property, save for a child's education or wedding, or go on a foreign vacation. If the returns are insufficient, you can adjust the variables until you find a combination that aligns with your goals.
Using a mutual fund calculator, you can calculate returns for both lump sum and SIP investment modes and compare their returns. For instance, the returns may differ if you invest Rs 5 Lakh in a lump sum or through the SIP mode in three years. Manual calculations are time-consuming, error-prone, and complicated, while an online calculator computes the results in seconds. Overall, an MF calculator is a valuable tool for goal-based investing and financial planning.
Apart from helping you plan goal-based investing, an online mutual fund calculator provides several other benefits, including the following:
Time-Saving: Manual calculations are time-consuming and hectic. The calculator simplifies the calculation process and displays the results within a flash of a second.
Easy to Use: An online calculator is extremely easy to use. You just need to enter the right variables and calculate the estimated returns.
Quick Comparisons: Using an online calculator, you can calculate returns for both MF investment methods – lump sum and SIP. You can compare the returns of both methods and decide accordingly. You can also compare multiple investment options by changing the investment amount, duration, and strategy.
Free Access: You don't need to pay to use the MF calculator. It is a free-to-use online tool available on the websites of top financial institutions like Kotak Mahindra Bank. You can use it as many times as you want.
Realistic Goal Setting: With an estimated value of your investments, you can set practical goals with the help of a mutual fund calculator. You can adjust the investment amount or duration to ensure it aligns with your aspirations.
You can easily use a mutual fund calculator based on your investment strategy:
Select the One-Time Lump Sum Investment option in the calculator.
Enter details of the investment amount, duration, and expected return rate.
The calculator shows the investment value at maturity with a breakup of the earned interest and invested amount.
Select the SIP option in the calculator.
Fill in the investment amount, SIP frequency, expected return rate, and SIP duration.
The calculator shows the amount you will receive at investment maturity.
Whether you invest in mutual funds in a lump sum or through SIPs, you must ensure they align with your investment goals. Here are a few factors to consider:
Investment Objective: You can invest in mutual funds to build a corpus, grow money, or save tax. Ensure the mutual fund you choose helps you achieve your investment goals.
Fund Type: You can choose a fund type that aligns with your goals and risk appetite from the various available options, including bonds, debt, equity, ELSS, etc.
Fund’s Performance: When choosing a mutual fund, study its performance over the past 5-10 years to see how it has withstood market volatility.
Fund House: Choosing the right fund house is extremely important, as their decisions will largely affect your returns.
Expense Ratio: A high expense ratio reduces your returns in the long run. So, use a fund with a low expense ratio to maximise your savings.
The ultimate objective of any investment is to achieve returns, and a mutual fund is no different. Having said that, you may invest in mutual funds through SIPs or in a lump sum. Using an online MF calculator, you can find the best option available for investment and ensure it aligns with your investment goals.
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