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Lumpsum Calculator

50K 5Cr
10K 1Cr
1Year 30Years
8% 15%
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Investment Required 51833
Invested Amount 10,000
Resultant Amount 86,463
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Mutual fund investments are broadly classified into two categories – SIP (Systematic Investment Plan) and lumpsum investments. While SIPs have become quite popular over the years, novice investors may not have a firm grasp on the concepts of lumpsum investment.

Unlike SIP, a lumpsum investment is when an investor makes an independent investment in a particular scheme in a single transaction.

What is a lumpsum calculator?

A lumpsum investment calculator helps estimate the returns* made by an investor on a lumpsum investment. Simply fill in the necessary details and the calculator will compute an approximation of the maturity value based on the data provided.

How does a mutual fund lumpsum calculator help you?

Investors can use this calculator to gauge the estimated returns on their lumpsum investments. A prospective investor can thus evaluate whether a selected investment option is meeting their financial goal at the end of the investment term or not.

Here are some of the benefits of using a lumpsum calculator:

  1. It provides you with the estimated return for the entire investment period. You need to mention details such as the investment amount, expected rate of return, and tenure (1-year, 3-years, etc.) of investment to reach a near-perfect approximation*.
  2. It helps investors plan and manage their finances better once they have an estimated idea of the maturity value of their investment(s).
  3. Using a lumpsum calculator saves time spent on making manual calculations and also aids in avoiding human errors.
  4. It is quite easy and convenient even for novice investors to use a lump sum investment return calculator with ease.
  5. One should note that as mutual fund investments are subject to market risks, one cannot predict the returns with accuracy.

How does a lumpsum calculator work?

A mutual fund lumpsum calculator is an automated tool that does all the complicated math for you. An investor usually needs to enter the following details into the tool:

  1. The quantum of the investment
  2. The period for which they are willing to stay invested
  3. The expected rate of return that the investor assumes mutual fund scheme is predicted to earn

Once the above inputs are made, the lumpsum calculator will calculate the maturity value of the mutual fund investment.

Lumpsum Calculator Formula to calculate mutual fund returns

Lumpsum calculators use a specific formula to compute the estimated returns on investments. It is a compound interest formula with one of the variables being the number of times the interest is compounded in a year.

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

Here,

A = estimated returns

P = Present value of investment

r = estimated rate of return

t = tenure

n = number of compound interests in a year

Let’s understand this with the help of an example.

Rakesh invests Rs15 lakh in a mutual fund scheme that offers average returns at the rate of 12% p.a. and compounds every six months for 5 years.

The estimated future returns, in this case, would be:

A = 15,00,000 (1 + 12/2) ^ 2/5

As you can surmise, this is a complex equation that could be out of grasp for a majority of novice investors. Here’s where a lumpsum calculator comes to your rescue and makes this calculation instantly.

In this case, the estimated returns at the end of the tenure would be Rs26,43,513.

Nature of mutual fund investments (SIP/lumpsum)

As stated earlier, an investor can choose to invest in mutual funds via two methods – SIP or lumpsum. Let’s understand these two investment methods in detail:

1. Lumpsum investments

Under a lumpsum investment, an investor invests a certain sum in a single transaction. However, it could be risky if you decide to invest a significant corpus at once.

To avoid this, investors can choose to invest systematically over a period of time using a Systematic Transfer Plan, also known as STP. STP is an automated way of transferring a pre-defined amount of money regularly from one fund to another. This plan is usually chosen by those investors who wish to make a lumpsum investment but also want to avoid the risk of timing the market and leverage market volatility.

Or, it is chosen by those investors who have a lumpsum amount and wish to invest in equity-oriented mutual funds. The lumpsum amount is invested in debt funds and systematically transferred to equity funds when the market is ideal for investments in equity mutual funds.

2. SIP investment

Under SIP investments, an investor invests a fixed amount of money in a particular mutual fund scheme at regular intervals. The investment amount, tenure of the investment, and the periodicity of the investments is predetermined.

Under the SIP investment methodology, an investor can invest as low as Rs500. The periodicity of these investments can be daily, weekly, bi-weekly, monthly, quarterly, or annually. This builds a regular savings habit in the investor and also instils a sense of financial discipline.

Investors who invest via SIP also benefit from rupee cost averaging, which means that they can buy more units when the prices are low and vice versa. This helps them average out the cost incurred to purchase a single unit of a mutual fund scheme.

What are the benefits/advantages of lumpsum mutual fund investments?

These are some of the benefits of investing in mutual funds through the lumpsum investment methodology:

  1. Investing a significant amount
    Through this method, investors can invest a significant amount in a mutual fund scheme. As a result, the investment value can increase considerably if the market enters a growth period.
  2. Ideal for long-term investments
    Lumpsum investments can be ideal for those looking to invest in a mutual fund for a comparatively longer tenure, say 10-15 years.
  3. Convenience of investing
    An investor does not have to worry about investment dates and saving enough every month to invest.

SIP vs Lumpsum

Following are some pointers that will help you know the difference between SIP and lumpsum mode of investment:

Parameter

Lumpsum

SIP

No. of investments

Once

Regular (fixed or variable)

Tenure of investment

Subject to your investment goals and market volatility

Subject to your investment goals but somewhat immune to market conditions

Cost of investment

High (requires a significant one-time investment)

Less (can invest amounts as low as Rs500)

Average costs

No benefit of rupee cost averaging

SIPs enjoy the benefits of rupee cost averaging as mutual fund units are purchased at different market cycles

You can even begin your lumpsum investment with a smaller amount and increase it over time as you become more comfortable with the procedure.

You can choose to go with the lumpsum investment methodology after considering aspects such as financial stability, current income, risk appetite, investment goals, and tenure. Happy investing!

*Returns on mutual fund investments are subject to market risks and may differ upon completion of investment tenure.

An investor education and awareness initiative by Franklin Templeton Mutual Fund

    1. One-time KYC (Know Your Customer) : One-time KYC registration is mandatory to invest in mutual funds. You can complete the same by submitting the following at any of our branches or collection centres: a) Duly filled and signed Central-KYC application form. b) Proof of Identity: Any document notified by the central government. c) Proof of Address: Same as identity proof (except PAN). d) Recent Passport Size Photograph. Copies of all documents submitted must be self-attested by the applicant and accompanied by originals for verification. You may also avail our Online KYC Registration facility while opening an online account with us, for more details please visit our website www.franklintempletonindia.com. In case you are KYC verified and want to update any information, please submit a completed KYC details change form with the required self-attested documents as proof to our nearest branch or collection centre
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.