Lumpsum Calculator

Lumpsum Calculator

Have you been wondering how much your investment in mutual funds will grow into? You could get help from mutual funds lumpsum calculator. How exactly does this lumpsum calculator mutual funds help you? The MF lumpsum calculator is a quick view of how much your lumpsum investment in a mutual fund would have earned under certain assumptions. There are lumpsum calculator which you can access on the internet and get the output by just feeding in some basic details, which we shall see in detail later.

What is Lumpsum?

The lumpsum investment is a one-time investment. It is the opposite of a SIP in mutual funds. In lumpsum investment, the investor invests in a particular mutual fund scheme in a single tranche. Lumpsum investing is quite popular among high-net-worth investors.

A lump sum investment entails investing substantial money all at once instead of periodic payments made over time, such as monthly or annual instalments. This strategy applies to various financial instruments, including those involving stocks, bonds, mutual funds, real estate, and retirement accounts.

When someone receives an unexpected gift, a substantial inheritance, or decides to set aside a significant amount of their resources for a particular financial objective, they frequently make lump sum investments. A person’s financial plan, risk tolerance, and investing goals will determine whether to invest in a lump amount or over time. A faster capital growth rate is possible, but the risk is larger because the entire investment is initially subject to market changes.

How To Use Lumpsum Calculator?

The lumpsum calculator permits investors to plan and manage their finances better more efficiently and also more effectively. The advantage with using a lumpsum calculator is that it saves the time spent in doing manual calculations and reduces the chances of errors.

Additionally, the lumpsum calculator is very simple so anyone with some basic computer skills can use it effectively. However, there is a risk factor about lumpsum calculators you must be familiar with. At the end of the day, mutual fund investments are subject to market risks and no prediction can be done with absolute accuracy and remains an approximation. Here are the key inputs that you need to provide to help the lumpsum calculator to do its job in a jiffy:

• You must clearly define the amount of initial investment in rupee terms. This will be the starting point for your lumpsum calculator
• The period for which you are willing and in a position to stay invested in that particular mutual fund. You can mention that in number of years.
• The expected rate of return in terms of compounded annual returns that the investor expects. You can use last 5 year returns as reference point.
• In the case of non-mutual fund assets like bonds, you can also input the frequency of compounding. It makes a difference as we shall see.

How Does Lumpsum Calculators Work?

The lumpsum return calculator operate based on the concept of future value. Given a specific interest rate, these calculators provide you with the anticipated future worth of your investment. This computation relies on a predetermined mathematical formula.

• FV = PV(1+r) ^n
• FV = Future Value
• PV = Present Value
• r = Rate of interest
• n = Number of years

As an illustration, suppose you’ve placed a lump sum of Rs 1,00,000 into a mutual fund scheme with a 20-year investment horizon. With an anticipated rate of return of 10%, you can determine the investment’s future value by employing the following calculation:

FV = 1,00,000(1+0.1) ^20 FV = Rs 6,72,750. You have invested Rs 1,00,000, which has grown to Rs 6,72,750. The wealth gain is Rs 6,72,750 – Rs 1,00,000 = Rs 5,72,750.

Lumpsum Returns Formula

The worth of your lump-sum mutual fund investment is contingent upon the market performance of your investments. Nevertheless, the mutual fund lumpsum calculator utilize a uniform formula to project returns from lump-sum investments. The mutual fund lumpsum calculator rely on a compound interest formula to estimate the value of your investment.

The formula used is:

A = P (1 + r/n) ^ nt

Where,

Lumpsum Example

As an illustration, consider the scenario mentioned earlier, where you invest Rs. 50,000 in a mutual fund for 7 years, with an anticipated annual average return of 12%. It’s important to note that the interest is assumed to be compounded annually.

The formula for lumpsum calculations can be used as follows:

A = ₹50,000 {(1+12/100) ^7}

A = ₹50,000 x 2.2107

A = ₹1,10,535

Rather than manually performing the calculations for your lump-sum investment with this formula, using an online tool such as a lumpsum calculator online provides a much more straightforward method to determine the value of your investment.

How Lumpsum Calculator Actually Calculates The Final Corpus?

Lumpsum calculators use the basic compounding formula as under:

Final Corpus = {(Upfront Investment) X (1 + rate per compounding)} ^ total compounding

Now, you may wonder as to why the number of compounding or frequency of compounding is so important. You will be surprised but it does make a difference to the eventual corpus into which your upfront investment grows. That is what is displayed by the lumpsum calculator. Check out the tabulation of results for different compounding frequencies.We assume an investment upfront of Rs.10,00,000 for a period of 5 years. The rate of return is at 12% annually. Let us see the corpus under different compounding scenarios.

As you can see in the above table, the lumpsum calculator clearly brings out that even as you keep your investment, return and tenure same but change the frequency of compounding, there is a substantial difference to your eventual wealth created. That is eloquently brought out by the lumpsum calculator.

Advantages Of Using IIFL Lumpsum Calculator

The IIFL mutual fund lumpsum calculator is an exceptionally convenient financial tool that offers several advantages:

• While returns on mutual fund investments are inherently subject to market risks and cannot be precisely predicted, a calculator provides a close approximation.
• It allows you to strategize your financial planning based on the estimated returns.Being an online MF lumpsum calculator, it can be accessed at any time and from any location, eliminating time and space constraints.
• A lumpsum MF calculator saves you time and effort, as these calculations can be time-consuming. Performing these computations manually for multiple variations can take hours.

Lump-sum investments are among the most utilized investment options, many of which have a proven track record of delivering substantial returns. You can initiate your investment with a smaller sum and gradually increase it as you become more accustomed to the process.