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Have you recently received a windfall sum of amount in your bank account? Or maybe you have substantial amount of cash lying around? Chances are you are looking to invest this money in the markets, probably even make a lumpsum investment. Lumpsum investment is when an investor invests their entire investment amount in one go. Usually, investors make a substantial investment to allow their money to grow over time. Have you ever wondered how to calculate mutual fund returns through lumpsum investment? Do you wish that there was a simple way that would help you estimate the true value of your investments at the end of the tenure? Well, there is. Lumpsum calculators essentially help you do the same. In this article, we will understand how you can calculate returns on your lumpsum investment.
What Is Lumpsum Calculator?
A lumpsum return calculator is an investment tool that helps investors evaluate the expected net corpus of their lumpsum investments at the end of the tenure. These calculators make it easier for investors to evaluate the future intrinsic value of an investor’s mutual fund investments in a seamless manner.
Working Of Lumpsum Return Calculator
Lumpsum return calculators work on the principle of future value of mutual fund investments. It helps you calculate the future value of your mutual fund investments at a certain rate of interest. In simple words, lumpsum calculators can help you derive the growth expected to be witnessed by a lumpsum investment over a period of time. If you wish to calculate the returns on your lumpsum investment at given interest rates, you might use the following formula:
FV = PV (1 + r)^n
Here,
FV = future value
PV = present value
r = average rate of return on mutual fund investment
n = number of years
Let’s understand this better with the help of an example. Neha invests a lumspum amount of Rs 1,00,000 in her desired mutual fund schemes. The mutual fund scheme is expected to offer average returns at 15% per annum. She decided to invest in the scheme for 10 years. Let’s calculate the expected future value of her investments at the end of the tenure
FV = Rs 1,00,000 (1 + 0.15) ^ 10
FV = Rs 1,00,000 (1.15) ^ 10
FV = Rs 1,00,000 * 4.046
FV = Rs 4,04,556
As you can see these calculations are quite intricate in nature. If you wish to avoid these complex calculations, you might consider simply using a lumpsum return calculator that will do all the complicated calculations on your behalf, and offer you with the value of your lumpsum investments within a matter of seconds. All you need to do is input these values against the right boxes in the lumpsum calculator. Almost all fund houses and AMCs (asset management companies) offer investors with this facility on their website. You may also consider factoring your investments against the appropriate inflation rate to achieve a truer picture of your investments. Happy investing!