Mutual Funds: How to calculate the future value of your Lumpsum Investments?
A lumpsum calculator shows the growth of a mutual fund investment using the amount, duration, and return rate. A lump-sum calculator helps investors calculate returns by calculating the one-time investments’s future value in mutual funds.
This Calculator is one of the tools of finance that is designed to calculate the futuristic value of a one-time investment. To estimate the potential returns on a significant amount of investment at the end of its tenure and maturity, this financial tool i.e. lumpsum calculator is used.
It calculates the possible return of the investment based on its initial value, rate of return and the investment period. This calculator is useful for those people who are considering a large and one-time investment in a mutual fund and want to gain insight into the potential returns.
Let’s understand it with an example:
Lumpsum investment value = p(1+r/n)^nt
Where p = Amount of lumpsum investment
r = Expected Rate of return on the investment
n = Number of times the returns are compounded in a year
t = Duration of investment (in years)
Step 1 – Enter the lump sum investment amount, the expected rate of return, and the time period of investment.
Step 2 – Calculate the approximate value of a lump sum investment.
In this case we have assumed that return is compounded once in a year.
The lumpsum calculator has various benefits –
i) providing convenience
ii) giving close estimates of return
iii) helping in planning investment.
This investment calculator also helps in simplifying calculations and well-organised financial planning.
A lumpsum investment is known as a one-time investment where investment is done only once and the returns are compounded over a given period of time via this invested amount. Investment of the amount in lumpsum form should be done while keeping various things in mind like present income, risk factor, age, time period, liquidity needs and many other factors.
When one has a huge amount of funds to invest and thinks that the market is going well and money won’t sink just after made the investment, this mode of investment is preferable.
To maximise the possible returns, a lumpsum investment is one of the best investment methods. The lumpsum investment allows the investor to make necessary changes to the investment plans, aligning them more effectively with the financial goals.
