People invest in mutual funds to accumulate long-term wealth. But mutual fund investments should never be random. Unwise investment choices can bleed your finances dry. Hence, a sound investment strategy is a must. A factor of a strong investment strategy is the choice of investment mode. There are two investment modes: the systematic investment plan or SIP mode and the lump sum mode. These two investment modes are different from each other.
What are lump sum investments?
To accumulate extra income, you need to do two things right. First, choose the best mutual funds that suit your financial needs and risk appetite. Secondly, opt for the investment mode that works for you. One option is the SIP mode, through which you invest regularly in your mutual fund every month. The other investment option is the lump sum mode, in which you make a one-time investment. You must know the mutual fund investment amount regardless of the investment mode. This is especially applicable for lump sum investments because they are a payment option in which you pay in full. Use an online lump sum calculator to determine the lumpsum investment amount.
What are lump sum calculators?
A lump sum calculator shows you the wealth you will probably accumulate over time via investing in mutual funds via lump sum method. You will get your probable net worth just by entering a few details on the formula box of the lumpsum calculator. The online calculator will show you both the investment amount you must invest and the possible wealth gain in a few seconds.
How do they work?
You will get the value of future returns through the lump sum calculator by using the following mathematical formula:
Future value = Present value (1+ rate of interest)^ number of years
For instance, you make a lump sum investment of ₹5,00,000 for 20 years. If the expected rate of return is 12%, the answer you will get here is ₹ 48,23,147.
How to use lump sum calculators?
These calculators can help you calculate the probable future value of your wealth in seconds. The steps involved in using a lump sum calculator are listed below:
- Type in the investment amount
- Enter your investment horizon. Investment horizon means the number of years you want to stay invested
- Modify the rate of return you are expecting
Now do you See? Using online lump sum calculators is easy.
What are the advantages of lump sum calculators?
These are the benefits of a lumpsum calculator:
- Provides an estimate:
Accurately calculating probable returns on mutual fund investments isn’t possible because the market risks will have an effect. These calculators will provide you with the closest possible estimate, which can help you form an investment plan.
- They save time:
A lump sum calculator provides the answer within seconds when you enter your investment amount, investment horizon and expected rate of return. Moreover, you can use these calculators limitlessly without paying.
- Easy accessibility:
A lump sum calculator is accessible 24×7 as it is an online tool. Furthermore, you can use these calculators without any constraints.
How can a lump sum calculator help you?
A lump sum calculator can help you evaluate whether your investment option is helping you reach your financial goals.