Mutual fund investment is the most preferred investment option among novice investors. There are several mutual fund schemes available in the market and one can get confused to choose the right mutual fund. So, before choosing any mutual fund, you must research well about the mutual fund company and certain metrics such as expense ratio, the experience of the fund managers, and the average return on the mutual fund investment. You can use a mutual fund calculator to calculate the estimated returns on your investment to make informed decisions. However, you need to keep in mind that the actual returns might vary from the estimated returns. In this article, we are going to learn about how to use the mutual fund calculator in 2022.
What is a mutual fund calculator?
A mutual fund calculator allows you to gauge estimated returns on your investment through SIP or lump sum. In other words, it is a tool that calculates the maturity amount of your investment and it gives you an overall idea of how the compound interest works in the long investment. Ideally, you should invest in mutual funds for the long term to reap the best returns. The longer the investment horizon, the more returns you are likely to get. It helps you to plan your finances and expenses so that you can achieve your investment goals.
Guide to use mutual fund calculator in 2022
- The first step is to open a mutual fund calculator on your mobile phone or computer.
- Now, you need to select the type of investment which can be made through SIP or lump sum payment. You can use a mutual fund SIP calculator to decide whether you should opt for SIP or not. SIP is a systematic investment plan that allows you to invest the same amount of money every month at a predetermined date whereas the lump sum investment is the amount that is made one time and the investor stays invested for many years to reap the best returns. So, understand what type of investment suits you before making any investment decisions.
- You will need to choose the investment period. Investors should invest for a longer duration to reap the best benefits. The longer the investment period, the more compound interest you earn on the investment.
- The expected rate of return can be chosen based on the mutual fund scheme you are going to invest in. First, you need to research various mutual fund schemes available in the market and then decide which mutual fund suits your requirements. Research various metrics of the mutual fund scheme such as the expense ratio, fund managers, and performance of the fund over the last year, and find manager experience. Check for the average return given by the mutual fund from the last few years and then based on that select the expected rate of return.
Let’s understand how a mutual fund calculator works with an example. Let’s say you make a monthly investment of INR 15,000 for 12 years at a 12% expected rate of return. The mutual fund calculator calculates the maturity amount within seconds and the total estimated return is INR 2,10,33,099 and the estimated value is INR 2,55,33,099 with a total investment of INR 45,00,000.
To conclude, Mutual investment can be done through lump sum or SIP. If you don’t have a considerable amount of money, you can opt for SIP. SIP investment can be started from as little as Rs. 500. You can use a mutual fund calculator to ease the investment decision as it gives you the estimated maturity amount within seconds.