Mutual Fund Calculator

A mutual fund is a lucrative way of investing in stocks, bonds, securities, and commodities. Instead of investing directly, a mutual fund is a better option as your investment is diversified and managed by industry experts.

Although mutual funds are very popular, many people are still hesitant to invest because they don’t know how much the return will be or what the different ways of investing in a mutual fund are.

This Mutual Fund Calculator is a great tool to get an idea about your return on investment in mutual funds. The calculator also includes options for SIP, lump sum, and step-up SIP.

What Is SIP In A Mutual Fund?

Many people think that a Mutual Fund and an SIP are the same. It’s not the case. SIP is a form of investment in mutual funds and stocks. SIP allows you to invest a fixed amount of money on a daily, weekly, or monthly basis.

You can increase the SIP amount any time. You can also pause the SIP and even cancel the SIP if you have financial hurdles in paying the SIP amount.

SIP is not like EMI. EMI is a burden for you that you need to settle every month, whereas, in the case of SIP, you can invest if you have money.

Why SIP Is Beneficial?

Investing a lump sum of money is not always possible. In India, where most people belong to middle-class families, investing a small amount of money every month is a better option than investing a huge amount of money at once.

SIP also builds a good habit of investing your money. You can also diversify your risk and return by investing a small amount of money in many mutual funds. For a lump sum, you may stick to investing in one or two mutual funds only.

What Is a Lumpsum Investment In A Mutual Fund?

A lump-sum investment means you invest a fixed amount of money one time in a mutual fund for several years. You will get a better return compared to SIP, as you are investing the whole amount in a single shot.

What Is A Mutual Fund Calculator?

The Mutual Fund Calculator is a simple tool that gives you a rough estimate of how much your return on investment through SIP would be.

The actual amount may vary because Mutual fund returns depend on various factors. The SIP calculator does not account for the Expense Ratio and Exit Load, either.

Of late, Mutual Fund houses have started offering Weekly SIP and Daily SIP too. However, this SIP calculator is not designed for weekly SIP and Daily SIP. Monthly SIP is still the most lucrative way of investment, and that is why our calculator is designed for that

This SIP calculator also gives you an option to estimate your return when you invest in lump sum. There is also an option to see your return if you step up your monthly SIP. This calculator covers every possible aspect of your investment in a mutual fund.

How Does This Mutual Fund Calculator Work?

The SIP Calculator works on the following formula.

FV = P x ( { [1 + r] ^ n – 1} / r) × (1 + r)

In the above formula:

FV = Future value of investment
P = Principal contributions each month
r = The expected rate of return (per month)
n = Number of contributions towards the principal

In the above formula, we first need to calculate the monthly rate of return (r). Many of us make the mistake of calculating the monthly rate of return; we simply divide the yearly rate of return by 12. That is not correct.

Please understand that, in a mutual fund, you get compound interest. So to calculate the monthly rate of interest, we need to use the following formula.

Monthly Return (r) = {(1 + Annual Return)^1/12} – 1

For example, if you want to calculate the monthly rate of interest for a 12% annual rate of interest, then it will be,

r = { [ 1 + 0.12 ] ^ 1 / 12 } − 1 = 0.00949 or 0.949%

Now, let’s calculate the Future Value of Interest.

FV = 1000 x { [ (1 + 0.00949) ^ 60 – 1] / 0.00949} x (1 + 0.00949) }, which becomes ₹81,104 in five years.

How To Use The Mutual Fund Calculator?

To use the SIP calculator, you need to know how much you can invest per month or what your financial goal is after a certain number of years.

For example, you may be able to invest 5000 per month irrespective of the end goal, and the calculator can give you a rough estimate of your future value of investment.

On the other hand, you may have an end goal in your mind, let’s say, you want 50 lacs after 10 years. In that case, the calculator will tell you what your monthly SIP.

Either way, the SIP calculator needs the following set of inputs.

• Your monthly SIP ( Or End Goal)
• Rate of Interest ( Let it be a conservative number, considering the rate of inflation)
• Number of years of investment)

Advantages Of A Mutual Fund Calculator

This SIP calculator comes with a set of advantages as shown below.

• You can plan your investment based on your ability to save monthly or derive your required monthly investment amount based on the goal you set.
• You will get an instant result when you change the input value.
• The calculator will also give you a yearly breakdown of return on investment so that you know how long you need to invest to meet your financial goal.

FAQ: Mutual Fund Calculator