Lumpsum investment is investing your entire amount in one go. Mutual fund lumpsum investments are also referred to as one-time investments. It is the simplest and the most popular form of investments. Unlike systematic investments, the entire amount in lumpsum earns returns from the day the amount is invested and till it is redeemed. Over long investment tenures, the power of compounding is the maximum in lumpsum mutual fund investment.
When Should You Invest in a Lump Sum?
- The most important requirement for lumpsum investing is the availability of the funds. If you have sufficient funds available and are ready to invest them in one go, then you should invest in lumpsum.
- You can invest your one-time or windfall cash flows in lumpsum depending on your investment needs. Examples include annual bonus / incentives, maturity proceeds of fixed deposits, Government small savings schemes, life insurance policies, gain from sale of assets (e.g. real estate), inheritance etc. You should always invest according to your financial goals and risk appetites.
- Lump sum investments are suitable (subject to availability of funds) for low volatility asset classes e.g. shorter duration debt mutual funds.
What is a Lump Sum Calculator?
A lumpsum calculator is a freely available online tool which is helpful if you are going to make lumpsum investment in any mutual fund schemes. You can use this calculator to figure out the future value of your current lumpsum investment assuming a certain rate of return and the investment period.
For example – If you input the following in a lumpsum calculator, investment amount Rs 10,000, expected return as 12%, and the period as 10 years, the Mirae Asset Mutual Fund lumpsum calculator will show the result as Rs 31,059.
As you can see in the above example, the lumpsum calculator tells you the point to point returns for the lumpsum investments. Thus, the lumpsum calculator gives you a sense of wealth creation over long investment tenures so that you can make informed investment decisions.
How Does a Lumpsum Calculator Work?
A lump sum calculator is a tool that can be used to calculate the lump sum payment that would be required to settle an outstanding debt. This type of calculator can be used to calculate the lump sum payment for various debts, including credit card debts, mortgages, student loans, and car loans. To use a lump sum calculator, you will need to input the outstanding balance of the debt, the interest rate, and the number of months or years you have left on loan. The calculator will then provide you with an estimate of the lump sum payment required to pay off the debt in full.
Benefits of Lumpsum Calculator
Here are the benefits of the lumpsum calculator:
It Makes Mutual Fund Lumpsum Investment Calculation Easy
A lumpsum calculator is a very useful tool that simplifies mutual fund investment. It considers factors like age, risk appetite, investment horizon, etc., and gives you an estimate of the amount you should be investing. This helps you in two ways:
First, it eliminates the need to calculate the investment amount manually.
Second, it indicates the right investment amount, thereby helping you avoid over or under-investing.
It Allows You to Compare Different Schemes and Find the Most Suitable One for You
Another benefit of using a lumpsum calculator is that you can determine your investment’s maturity value. This way, you can make an informed decision about whether to withdraw your money or reinvest it.
You can use a lumpsum calculator for both short-term and long-term investments. For short-term investments, you can use it to find out the return on investment (ROI) of different schemes. On the other hand, for long-term investments, you can use it to find the corpus you will accumulate over time.
Apart from helping you compare different schemes, a lumpsum calculator can also be used to monitor your current investments. You can input the scheme details and the amount invested, and the calculator will show you the current value of your investment.
It Help in the Long Run by Giving Better Returns
The Lumpsum calculator allows you to compare different schemes and gives you an idea of how much return you can expect from each scheme over the long term. This is because it takes into account the historical performance of each scheme. Thus, it is a valuable tool for anyone looking to invest in a long-term scheme.
It Keeps Track of Your Investments and Provides Regular Updates
The lumpsum calculator is a simple online tool that helps you keep track of your investments and provides regular updates on their performance. It also allows you to set up automatic payments into your investment account, so you don’t have to worry about missing a payment or forgetting to invest. Moreover, it provides an easy way to monitor your investment portfolio’s performance and make changes as needed.
Gives You Access to Research Reports That Can Guide Your Investment Decisions
The research report is a critical part of the investment decision-making process. It assesses the company’s financial health, governance, and management quality, as well as its prospects in the industry. The report also analyses the risk factors associated with investing in the company.
A calculator is a valuable tool for investors who want to ensure they are getting the best possible deal on their investment.
How Can You Use a Mutual Fund Lumpsum Calculator to Your Advantage?
A lump sum calculator can be a potent tool for investing in mutual funds. You can quickly and easily determine how much money you need to invest to receive an inevitable return by inputting a few simple pieces of information.
This calculator is available for free online and can be found by a simple search. Once you have located one, enter the following information:
- The current value of the mutual fund (also known as the net asset value, or NAV)
- The number of shares that you currently own
- The purchase price per share
After entering this information, the lump sum calculator will provide you with two crucial pieces of data.
How Are the Returns Calculated?
The lumpsum calculator uses compound interest formula with a variable being the no. of times the return is compounded in a year. The formula is as below:
A = P (1 + r/n) nt
Here A = Estimated return, P = Present lumpsum investment value, R = Rate of return, T = Investment tenure and N = No. of compound interest in a year.
For example – Pradip invests Rs 10 Lakhs in a mutual fund scheme for 5 years assuming 12% return compounded half-yearly. Therefore, A = 10,00,000 (1+12/2) 2/5. The result will be Rs 17,90,848.
The Bottom Line
We discussed how the lumpsum calculator works and helps plan your lumpsum investments in mutual funds. In Google sometimes, the users also search for a lumpsum SIP calculator. Before using such calculators, be sure what inputs you are making with regards to your lumpsum investments. We hope that with this article, you have a clear understanding of how to use lumpsum calculator for your investments.