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Lumpsum investment is when you decide to invest the entire investment amount in one go.
Lumpsum mode of investment is often preferred by a wide group of investors as these modes of investments have comparatively lesser variables than SIP investment with a higher potential to fetch significant returns.
Talking about significant returns, did you know you can evaluate the probable returns to be earned on your lumpsum mutual fund? A lumpsum calculator helps to do exactly the same.
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In this article we will understand what a lumpsum calculator is and how can you use it to determine the future returns on your mutual fund investments.
What is a Lumpsum Calculator?
As in a lumpsum investment the entire investment amount is invested in one go, usually a significant sum of money is invested by an investor.
A lumpsum calculator is a computerized investment tool that does all the complex investment math for an investor. Using a lumpsum return calculator, you can determine the probable returns* that you are likely to make at the end of the tenure, assuming that the mutual fund you decide to invest in offers a specific annual rate of returns.
In short, a lumpsum calculator helps to determine the maturity amount for a given present value of a lumpsum investment.
How to Use a Lumpsum Calculator?
A lumpsum calculator is quite easy and seamless to use – even an amateur can use it with relative ease. A lumpsum return calculator usually has three input boxes. These are:
- Average annual returns on the mutual fund investment
- Investment duration
- Investment amount
Firstly, you need to determine the annual average rate of returns offered by your mutual fund scheme. Next input the investment tenure for which you plan on staying invested in the fund such as 10 years, 15 years, and so on.
Though lumpsum mutual funds do not impose any lock-in tenure on investors (except for ELSS mutual funds that have a lock-in period of three years), experts advise investors to stay invested for a longer duration say 10 years or more for the fund to achieve optimal wealth appreciation.
Lastly, enter the investment amount that you wish to invest in mutual funds through a lumpsum mode of investment.
Once you have entered these values properly, click on the calculate button to evaluate the future value of your investments. Lumpsum calculators are provided by most mutual fund houses and AMCs (asset management company).
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Note that several lumpsum return calculators offer the additional feature for adjusting your returns against an appropriate rate of inflation. It is advised to use this feature as factoring inflation in your investments provides a better and truer picture of the future value of your mutual fund investments. Thus, use the inflation button to evaluate the realistic value of your earnings.
* A mutual fund return calculator including a lumpsum calculator offers probable returns on mutual fund investment for a specific duration. However, these returns are not guaranteed and should not be taken as a definite indicator.
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