A mutual fund calculator is an online tool that helps investors estimate their returns and the future value of their mutual fund investments. By inputting key details such as investment amount, time horizon, and expected rate of return, you can see how your investments may grow over time.
Since mutual fund investing should ideally be goal-oriented, this tool helps you determine whether your planned investments align with your financial objectives.
An online mutual fund calculator works on a simple algorithm, wherein you just have to enter some information, and it provides an instant estimate of your potential returns.
Steps to Use the Mutual Fund Calculator:
Here are the simple steps to use this tool:
1. Choose Your Investment Method
Select whether you want to invest a lump sum or contribute regularly over time.
2. Enter Investment Details
Input your investment amount, the duration of your investment, and the expected rate of returns.
3. Get the Results
Once you input these details, the calculator will show your estimated future value along with a breakdown of total investment and gains.
Real-Time Adjustments
As you change your inputs, the calculator dynamically updates your estimated returns. It also provides visual insights such as bar charts, making it easy to compare different investment scenarios.
While the calculator simplifies the process, it’s helpful to understand the formulas behind mutual fund return calculations:
| Lumpsum investment formula | SIP investment formula |
|---|---|
M = P x (1+R)^n | M = A [ (1 + i)n – 1] x (1 + i)/i |
Where: | Where: Note: For daily/weekly SIPs, adjust i and n accordingly. |
You should know two things about both formulas.
First, the formula used in the lump sum formula is CAGR (compound annual growth rate) while the one used in the SIP formula is XIRR (Extended Internal Rate of Return). The reason is that CAGR works only for calculating returns on a point-to-point basis. When there are multiple cash flows (like in the case of SIP), you need to use XIRR because the returns for each cash flow will differ. XIRR helps you calculate a single return percent for all cash flows and is, therefore, relevant to SIPs. If you are keen to learn more about this, click on XIRR and CAGR to know more.
It’s also worth noting that the based on the scheme you choose and whether you choose a direct or regular plan. The fund house will deduct their commission from your returns when you invest through the regular mode (i.e., through a broker, advisor, or distributor). Since a direct plan doesn’t involve an intermediary, you don’t pay any commission, which reduces the expense ratio and translates to relatively higher returns. Preferably, you’d want to go with a direct plan when choosing mutual fund schemes in India because you’ll end up with relatively higher returns.
For instance, let’s assume that the difference in the expense ratio between the direct and regular plan of a scheme is 0.75%. Following are the returns and the investment value calculated using the mutual funds calculator for direct vs regular plans, considering an investment of ₹6 lakh over 10 years:
| Factors | Direct | Regular |
|---|---|---|
Expected return before expense ratio (p.a.) [A] | 13% | 13% |
Expense ratio [B] | 1% | 1.75% |
Expected return after expense ratio (p.a.) [A – B] | 12% | 11.25% |
Total returns (based on expected returns after expense ratio) | ₹12.64 lakh | ₹11.42 lakh |
Maturity value | ₹18.64 lakh | ₹17.42 lakh |
Note that by simply choosing to invest in a direct plan (i.e., without taking any additional risk), you’re able to increase your returns substantially. You can invest in a direct plan online with just a couple of steps through the ET Money website.
A mutual fund investment calculator is an incredible tool in your investment planning process as it helps you estimate the future value of your investment in a mutual fund. It uses various factors, such as the investment amount, period of investment, and the rate of return, to estimate the future value of your investment. You can use this estimate to ascertain whether it is sufficient to achieve your financial goals. It can be anything like buying a car or dream house, children’s education, vacation, etc.
Apart from this, it also allows you to adjust the variables of the calculator, which can help you understand what combination of investment, rate of return, and holding period is required to achieve your targets.
Using the mutual fund returns calculator, you can calculate mutual fund returns for both SIP and lump sum modes to see how they compare. For instance, investing ₹5 lakh as a lump sum or investing the same amount over three years can generate different returns. Manually calculating them can consume a lot of time, while mutual fund return calculation with a calculator typically takes less than 30 seconds. Overall, a mutual fund calculator is valuable for making smart investment choices and planning for your financial future.
Here are some advantages of using an online mutual fund calculator:
Easy to use: It is very easy to use, as you just have to enter three variables, investment amount, investment period, and investment strategy, to calculate your estimated return.
Time-Saving: Manual calculation of SIP or lumpsum return investment is a hectic and time-consuming process. An online mutual funds calculator simplifies this process, and you can get your expected return in a couple of seconds.
Quick Comparisons: It gives you options to calculate return on both investment methods–SIP or lumpsum. You can compare the estimated return of both methods and take investment decisions accordingly. Also, you can check your estimated return by changing your investment amount, duration, and investment strategy, which helps in comparing multiple options.
Realistic Goal Setting: It gives you the estimated future value of your investment. You can set realistic financial goals using the mutual fund return calculator. It allows you to adjust investment duration and rate of return to align with their financial aspirations.
Free to use: You do not have to pay anything to use an online mutual fund calculator. It is free to use, and you can use it any number of times.
A mutual fund calculator estimates the future value of your mutual fund investment based on inputs like investment amount, tenure, and expected rate of return. It uses formulas such as CAGR for lump sum investments and XIRR for SIPs to calculate an estimated return.
The accuracy mutual fund calculator depends on the expected rate of return, investment duration, and expense ratio. Since mutual fund are market linked, returns fluctuate based on market performance, the actual returns may differ from the estimated ones.
Yes, the mutual fund calculator is free to use and can be accessed online anytime to estimate your investment returns.
Direct plans have a lower expense ratio compared to regular plans, leading to higher net returns over time. A mutual fund calculator can help you compare both options.
Yes, you can use the calculator for any investment duration, from a few months to several decades, to see potential returns.
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