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Mutual Fund Lumpsum Calculator – Calculate your mutual fund returns

April 2, 2019 by Upwardly

The article briefs about mutual funds, mutual fund calculator or the lump sum calculator.

Mutual Funds are investment schemes professionally managed by financial experts. Many investors, individuals, and entities invest money in these schemes or funds to generate better returns. These investment schemes could invest in equity or debt or a mixture of both. There are basically two ways of investing in mutual funds. One can invest a big chunk at once (lump sum) or invest small amounts regularly (SIP). Mutual Fund schemes are available in growth and dividend options. Within the dividend option, payout or reinvestment options are available. In the growth option of Mutual fund schemes, profits made by the scheme are invested back into it. The dividend option can re-invest (dividend reinvestment option) or pay out the dividends (dividend payout option) the profits made by the fund.

Mutual funds are usually Equity, Debt and Hybrid funds. Within equity, there are small, mid, large-cap, diversified and sector funds. In equity funds, there is a special category for tax saving known as ELSS funds. Within debt funds, there are money market, ultra-short, liquid plus and debt funds. In hybrid funds, there are equity hybrid and debt hybrid funds. The Securities and Exchange Board Of India (SEBI) regulates the Mutual Funds industry, and there are around 45 different Mutual Fund houses and more than 12000+ Mutual Fund Schemes.

Scripbox’s Mutual Funds Calculator

Scripbox’s Mutual Fund lump sum return calculator helps you to estimate wealth creation by making Lump Sum investment in a fund of your choice for the investment period specified.

Using the mutual fund investment calculator, you can build the following scenarios:

When you know the return that you are expecting:

Scenario 1: Using the lump sum calculator, enter the details like Return (%) that you are expecting, Initial Investment amount and Investment Period. Below example, shows you that you can earn Rs 1,74,204 upon investing Rs 15,000 for 15 years at 17.76%.

Scenario 2: If you know how much you would want at the end of 15 years, you can try the ‘Set a Target Amount’ option in the lumpsum calculator. To earn Rs 2,00,000 at the end of 15 years at 17.76% you need to invest Rs 17,300.

The above-given scenarios are just a few examples of the Mutual Fund Calculator. Try out the MF calculator with your own variables and know much you can earn at the end of your investment.

Advantages of Mutual Funds

Mutual Funds, historically, have proven to be much better investment avenues than other products available to investors. Investments in MF have proven to be more effective because of the following reasons:

Managed by professionals: Financial experts invest in equity and fixed income products invest on your behalf. They are supported by large teams which assist them in analyzing data and dissecting nitty-gritty of the markets(macro and microeconomic environment, GDP rates, Interest rates, and its future outlook, fundamental analysis into each company that they invest or not invest in) which clients as individuals might not be able to do themselves.
Better taxation structures: The government of India offers incentives to customers to invest in mutual funds by providing tax structures. So while your fixed deposit returns are completely taxable, Investment in debt mutual funds come with tax indexation benefits (which can lower your tax burden to almost as low as 2% as opposed to as high as 30% in Fixed deposits). Investments in equity mutual funds have only 10% tax (on gains withdrawn above ₹1 lakh in a year) compared to 30% taxation on FDs. Gains on equity mutual funds withdrawn up to ₹1 lakh in a year are exempt from tax.
Better Flexibility: Mutual funds are held in units. So you can always redeem your investment partially while keeping the other investment intact and untouched. This is unlike fixed deposits where you have to fully withdraw your investment and pay pre-mature withdrawal charges on the entire amount.
Better liquidity: Open-ended mutual funds can be sold anytime. This is unlike investment like Insurance, PPF, NSC, etc. where you have long lock-in periods and large pre-mature withdrawal penalties.
Better Diversification: Mutual funds invest in multiple securities. This diversifies the risk for you much better than other investments.

How to invest in Mutual Funds?

Investors have to provide documentation mandated by SEBI to get Know Your Client (KYC) registration. This KYC registration can be done Online and Offline. Once the KYC is registered with the SEBI registered entities, investors can start investing in Mutual Funds. This is a one-time activity. Once KYC is registered, Investors can start investing in Mutual Funds through any of the intermediaries.

How can I invest in Mutual Funds through Scripbox?

Once your KYC is done, and you have registered on our platform, you can invest in Mutual Funds. Either through a Lump Sum (One Time) or Systematic Investment Plan (SIP).

For Lump Sum investments, you would need to transfer money from your Bank account through our Payment gateway.

For SIP (Systematic Investment Plan) investments, once you have placed the order through our platform, you will need to activate your mandate so that the payments are processed automatically. There are two ways you can set up your mandate:

If you are investing from the listed banks, then you can instantly link your bank account using internet banking.
We will send you a bank linking form you will need to sign it and send it to us. This allows our payment gateway to deduct money from your bank account automatically based on your instruction. Scripbox’s logistics partners would collect the form from your home/office and send it to your bank for registration. Once the mandate is registered (it typically takes 2-3 weeks for the Bank to register the mandate), on a specific date (you can choose the week of the month through our platform), funds would be auto-debited from your account and the investment done in the mutual fund scheme of your choice.

Best Mutual Fund for Lump Sum Investment

Best mutual funds to invest lump sum amount and earn high returns are:

Long Term Wealth – Equity Funds

Funds	Returns (5 years)
Mirae Asset Large Cap Fund (G)	18%
Invesco India Growth Opportunities Fund (G)	2.18%
Kotak Standard Multicap Fund (G)	19%
AXIS Bluechip Fund (G)	5.52%

Short Term Wealth – Debt Funds

Funds	Returns (5 years)
Tata Liquid Fund (G)	7.58%
Kotak Savings Fund (G)	7.93%
ICICI Prudential Savings Fund (G)	8.27%

Tax saver Plan – ELSS Funds

Funds	Returns (5 years)
Mirae Asset Tax Saver Fund (G)	-0.42%
Motilal Oswal Long Term Equity Fund (G)	13%

Emergency Fund – Liquid Funds

Funds	Returns (5 years)
Axis Liquid Fund (G)	7.84%
Tata Liquid Fund (G)	7.58%

Use the Scripbox’s mutual fund returns calculator to find out how much can you earn with your mutual fund investment.

SIP vs Lumpsum: SIP vs Mutual Fund: When to choose what?

February 18, 2019 by Upwardly

SIP vs Lumpsum. SIP vs Mutual Fund. Which is better and when to choose what?

We all have been hearing this question for a long time now. It isn’t easy to pick one. Each one has its own benefits. The main difference between a SIP and mutual fund (lump sum) is the cash flows. One invests only once in a lump sum investment and in SIP he/she invests regularly. There is no rule that a person investing through SIP can’t do a lump sum when there are surplus funds available.

It is always advisable to invest through SIP as it inculcates financial discipline. But then there are debt funds where SIP is not suitable. Sounds confusing right? Well, it isn’t. Read on know when is SIP investing recommended and when lumpsum is recommended.

When is SIP suitable?

Systematic Investment Plan (SIP) is an investment option available for mutual fund investors. Investors can invest a fixed sum on a regular basis. SIP investing has multiple benefits.

Rupee cost averaging: Since the investment is spread over a period of time, the average cost of investing comes down.

Bring Discipline into investing: Since the SIP amount is deducted automatically from your bank account every month, SIP brings out the much-required discipline in investing.

Prevent the problem of Market Timing: Since SIP gets you more units when markets are down, they lower the average cost of investing. This brings higher returns in the long term.

Flexibility: You can stop, pause, change the amount and withdraw any amount from a SIP.

But when and who should choose to invest through a SIP?

A regular income person can choose to invest in SIP. This reduces the burden to invest a lump sum amount at once. For a person investing in equity funds and looking for a long-term investment, SIP is highly recommended. Also, SIP investing works well in a falling market. This is because the investor can accumulate a large number of units when the price is low. The growth rate will be high once the markets pick up the pace.

The main question is when is the right time to choose a SIP. Well anytime is the right time. Let the market be at an all-time high or low, it shouldn’t affect SIP investors. This is because it assumed that SIP investors invest for a long time (5-6 years minimum). It is always recommended to invest through SIP for the long-term as investing throughout an entire business cycle is beneficial for the investors and they can reap high benefits.

When is lump sum suitable?

Lump sum investing suits investors who want to invest for the short-term in debt mutual funds. There is no point in investing in debt mutual funds through SIP. Rather a lump sum route should be used to invest in debt mutual funds as the recommended horizon for debt funds is less than 3 years.

So does that mean one cannot invest in equity funds through lump sum? Well, certainly not. One can invest in equity mutual funds through lump sum investment. Any form of windfall gains, profit from the sale of an asset or any surplus cash available can be invested in the market to earn a return on them. Even salaried individuals can invest through lump sum when they get a year-end bonus or festival bonus.

When to choose lump sum investment?

A lump sum investing approach tends to do well in a rising market. But what if they are wrong and the market falls? Well there is a way out for this. One can always opt for STP (Systematic Transfer Plan). An STP is a regular transfer of money from another fund instead of your bank account. Instead of keeping the money in a bank you invest in a debt fund which has the potential to earn higher returns than a savings bank account. Chose a short-term fund debt fund and equity fund to do a STP within the same fund house. Then you can instruct the fund house to do a STP into an equity fund of your choice over a period of time.

It can never be SIP vs. Lump sum. There is always an ‘and’ in between them as they go hand in hand. An investor cannot alone choose one type of investing option. SIP and lump sum investing have their own benefits and work for different investors at different times. Pick an investment option based on your situation and voila you are earning returns on your investment!

Mutual fund investing can be done online and offline. At Scripbox investing is as easy as online shopping. Invest in the best long running mutual funds with Scripbox. Speak to an expert at 1800-102-1265 or share your contact details on help@scripbox.com

Annualized Return – Meaning, Formula and calculation explained.

July 9, 2018 by Upwardly

Annualized Return	Time Taken to double money
5%	14 years 2 months
8%	9 years 0 months
10%	7 years 3 months
12%	6 years 1 months
15%	4 years 11 months
20%	3 years 9 months
25%	3 years 1 month

‘Return’ is the yield that an investment generates over a period of time. It is the percentage increase or decrease in the value of the investment in that period. Returns on mutual funds are expressed in 2 different ways, viz, absolute and annualized. The most popular one being the annualized returns or CAGR (Compounded Annual Growth Rate).

A mutual fund fact sheet shows the fund facts and the most important to us as investors are its return. The return on an investment is usually given for 1-month, 3-month, 6-month, 1-year, 3-year, 5- year and so on.

The returns for 1 to 3 months are given in an absolute basis and the returns from 1 year and above are given in an absolute basis. So when you see a 5% under the 3-month column, it means the fund has given 5% in 3 months’ time. 12% annualized return in 3 years means 12% return earned every year for the past three years and not 12% total return in 3 years.

Albert Einstein hasn’t simply said that compound interest is the 8^th wonder of the world. Compounding can do wonders to your money. 12% annualized return can double your money in 6 years. And 15% annualized return can double your money in less than 5 years!

Absolute Return vs Annualized Return

Absolute Return

Absolute returns, also known as point-to-point returns, calculate the simple returns on initial investment. To calculate this return all one needs is the beginning value – NAV and ending NAV (present NAV). In this method, the duration of holding the fund is not important. One usually uses absolute returns to calculate returns for a period of less than one year.

Formula for absolute returns

Absolute returns = ((Present NAV – Initial NAV)/ Initial NAV) *100

Annualized Return

It is the amount of money the investment has earned for the investor per annum. You can also calculate it as a percentage value for an annualized rate of return. CAGR is compounding of returns earned over a period of time. It provides a snapshot of an investment‘s performance but doesn’t give investors any indication about the volatility.

Using it gives a clearer picture when comparing various mutual funds that have traded over different periods of time. However, this is applicable only if you re-invest your gains every year.

Formula to calculate the annualized returns

Annualized return = ((1 + Absolute Rate of Return) ^ (365/no. of days)) – 1

Annualized return = ((1 + Absolute Rate of Return) ^ (1/no. of years)) – 1

Calculation of annualised return in mutual fund

Date	Fund NAV	Time Period	Absolute Returns	Annualized Returns
Mar 28, 2018	30.51
Feb 28, 2018	31.02	1 month	-1.64%	-1.64%
Sep 29, 2017	28.79	6 months	5.97%	5.97%
Mar 31, 2017	25.82	1 Year	18.16%	18.16%
Mar 31, 2016	20.96	2 Years	45.56%	20.65%
Mar 31, 2015	21.73	3 Years	40.40%	11.98%
Mar 31, 2013	10.99	5 Years	177.62%	22.66%
Mar 31, 2008	9.75	10 Years	212.92%	12.08%

The above table shows the NAV of an ELSS fund, (which has been taken only for the purpose of illustration). The returns up to 1 year are the same in the case of absolute and annualized. The returns after 1 year are different. While the absolute percentage show how much the investment has grown from the initial date. On the other hand, the annualized percentage shows how much the fund grew annually to reach that current return.

This doesn’t mean the fund grew at a certain rate every year. It’s just the average growth of the fund year on year over the investment period. Annualized return normalizes the absolute return and lets you know the growth on an investment over a given period of time.

Why 1-year returns for some funds are higher than its 3 or 5-year returns?

Mutual funds return on an investment is reported on an annualized basis. And mutual fund returns fluctuate across years. This is the reason why 1-year returns may appear higher than 3 years returns.

Let me take you through a small example.

The same fund which is one of the top funds in tax saving category of mutual funds has the following annualized performance:

1yr: 18.16% annualized return => Rs 1 lakh invested in this fund 1 year ago has come to a final value of Rs 1.18 lakh today

3yr: 11.98% annualized return => absolute returns of 40% in 3 years => Rs 1 lakh invested in this fund 3 years ago has come to a final value of Rs 1.40 lakh today

5yr: 22.66% annualized return => absolute returns of 177% in the last 5 years => Rs 1 lakh invested in this fund 5 years ago has come to a final value of Rs 2.77 lakh today.

5 year 22.66% annualized return mean that money invested 5 years ago in the fund has grown 22.66% every year, not 22.66% overall but instead 177% overall. This is the summarized interpretation of annualized performance. This is the principle of compounding at work growing one’s investment over the investment period!

A Focused Funds Guide in India

June 19, 2018 by Upwardly

A focused fund is an equity mutual fund investing in a limited number of stocks. As per SEBI guidelines, a focused fund can invest in a maximum of 30 stocks. Other equity mutual funds typically hold 50-100 stocks. Some focused mutual funds also state their objective to focus on the large-cap or mid-cap stocks. Other funds do not specify any such category focus and follow a bottom-up stock selection investment strategy. The objective of focused funds is to deliver high returns by investing in a limited number of quality companies with growth potential.

Should one opt for Focused Funds?

The main aim of mutual funds is to provide optimal diversification. But beyond a limit, diversification becomes pointless and may lead to lower returns. The entire strategy of focused funds is to hit the bull’s eye with the right stocks and earn a high return. It forces the fund manager to buy material stocks. This approach helps fund managers to build stringent process to select a stock for their portfolio.

With higher returns, comes higher risk (losses) too. Too much concentration on few stocks can hit the bull’s eye or miss the target completely too. That said, accurate concentration can be a skill. The focused funds follow a top-down approach to select sectors and stocks and place calculated bets on the potential out-performers.

Should I pre pay my home loan or invest in mutual funds?

May 9, 2018 by Upwardly

Decision making can be tedious when multiple options are available. Financial decisions always seem the most difficult ones to make. In the era where home loans are available at such cheap interest rates, one can easily get a loan to buy or build a home.

Building or buying a home is more of an emotional choice and it can hardly be influenced by anyone. With home loans being available at cheap rates and rising equity markets, one would be struggling with the decision of buying a home, repayment of a home loan or investing in the equity market. If one had surplus money in hand, what would they do? Invest in mutual funds or repay an existing loan or invest in property?

Investing in property vs investing in other investment products (equity)

Investing in a home would mean an opportunity cost analysis has to be done. You would invest lump sum right now plus a regular payout in the form of EMI should be made. You have to compare the cost of this against the return you will get against investment in any other investment product. If the return from investing in equity is higher than the return from the property you get after deducting the cost of maintenance and cost of interest and adding the rent (if any) from the property.

Home loan prepayment vs investment in mutual funds

A bonus amount received from the employer might seem a good opportunity to prepay a part of your loan. This means the tenure of your home loan can come down by 2-3 years. But is it a feasible option? Interest payments up to Rs 2,00,000 are eligible for tax deduction under section 24. Investment in mutual funds can help you to reduce the loan tenure as well. Let’s not believe it blindly, instead let’s see an illustration for the same.

Let’s say there is a home loan of Rs 75,00,000 taken in the year 2014. The interest rate in the market now is 9%. The EMI is Rs 67,479 and the loan will mature in 2033 December.

Scenario 1: You prepay a part of the loan of Rs 7, 00,000 in Jan 2018. This will reduce your loan tenure by 3 years and you will be debt free in the November 2030.

Scenario 2: You invest Rs 7,00,000 in Jan 2018 in equity mutual funds. Let’s say you get a decent interest rate of 12%. You will be able to pay off your loan by 2029 December. Here it is assumed that you will close the loan once the investment amount is equal to the outstanding loan.

Scenario	Prepayment / Investing	Loan Tenure
Scenario 1	Prepayment of loan	November 2030
Scenario 2	Investing in Equity @ 12%	December 2029

Other Factors to Consider

One’s decision shouldn’t solely depend on numbers. There are various other factors that affect this decision. They are:

Emotional State

Is being in debt bothering you? Will being debt free make you happy? Then you are better off paying the loan.

Risk capacity

Equity markets are volatile and the returns from them fluctuate highly and there will be a period of negative returns. One should be patient enough with them and a minimum investment period of 7 years is suggested.

Other financial goals

Having other financial goals with tenures being close by, it’s better to invest more in those goals than prepaying a loan.

Liquidity

If you want to improve your liquidity then it’s better to invest in debt mutual funds than prepaying a loan. In case you are looking for short-term liquidity then equity funds might not be an option for you. You might also look at moving your home loan into a super-saver or smart home loan kind of structure where the spare funds can be held in the home loan account. This will reduce the interest on the home loan while providing you with liquidity at the same time, with a rate of return equivalent to the rate of the home loan. If you have a major goal coming up in less than five years, you may want to look at debt mutual funds for investing your money.

After considering the above factors make an informed decision. So, as you can see that choosing a prepayment of a home loan over a investment in mutual funds or vice versa cannot be an ideal decision for everyone. It depends on individual circumstances and should be dealt differently.

Invest in mutual funds with Scripbox. We are always ready to assist you at Scripbox.

Will Rs 1 crore be enough to take care of all your needs after 15 years?

March 27, 2018 by Upwardly

Typically, many investors want to create a corpus of Rs 1 crore after a decade or more. In some cases, the corpus is to take care of retired life, whereas in others, it is mean for children’s education or marriage. Some investors just like the idea to have a corpus of Rs. 1 crore after some years. This raises many questions in our heads: has the person just picked up a random number? Or has she worked with real numbers? Has the person accounted for inflation?

Many investors have an affinity towards round figures and Rs 1 crore tops the list of such numbers.

Is a big, round number sufficient?

A figure that appears big today may not be sufficient to take care of all your future financial needs. This is important because the value of money does not stay same forever. For example, if the course fee Rs 20 lakh today. It would not remain the same after 15 years. Because of the impact of inflation, it would cost much more. First, you may find out how much your daughter’s education cost now. Then you can find out how much it would cost after 15 years. To understand the impact of inflation, ask yourself ‘How much I used to spend 10 or 15 years ago?’. Once you answer this question, you will realize that inflation erodes the real value of your money and a big figure will not be worth the same after a few years.

Value of 1 Crore after 10, 15, 25, 50 years

Let us see how much 1 crore is worth in 10, 15, 25 and 30 years’ time.

	In 10 years	In 15 years	In 25 years	In 30 years
Worth	50 lakhs	36 lakhs	18 lakhs	13 lakhs
Division Factor	2	2.8	5.4	7.6

Impact of inflation on Rs. 1 crore. Inflation is assumed to be 7%.

For example, to find how much is Rs. 1 crore in 15 years use the division factor of 2.8. That means, Rs 1 crore today will be worth (1 crore/2.8) approximately Rs. 36 lakhs after 15 years.

Assessing the Impact of Inflation

Let us see how much you would need in 10, 15, 25 and 30 years’ time to have an equivalent wealth worth Rs 1 crore today.

	In 10 years	In 15 years	In 20 years	In 30 years
Equivalent Corpus	2	2.8	5.4	7.6
Multiplication Factor	2	2.8	5.4	7.6

Equivalent of Rs. 1 crore today in future. Inflation is assumed to be 7%.

For example, take your child’s higher education. Let us assume that it costs Rs 20 lakh today. Let’s assume again that he would go to college in 15 years. Now you need to determine how much this education (which costs Rs. 20 lakhs today) is going to cost after 15 years. Use the multiplication factor of 2.8 from the above table. That means, after 15 years you will need a corpus of (Rs. 20 lakhs * 2.8) = Rs. 56 lakhs to fund your child’s higher education.

For the mathematically inclined, we present the detailed calculation below:

Future Value (FV)= Present Value (PV) * (1+r) ^ n

where;

FV= Future value of your goal

PV= Present value or current cost of your goal

r= annual rate of inflation (in %)

n= time left to reach your goals (in years)

Putting the values of the above example in formula, assuming education inflation is 7 per cent, the same education course will cost Rs. 56 lakhs after 15 years.

Conclusion

From the above discussion, we clearly understand that it is wise to add a realistic inflation figure to all your future financial requirements. If you are planning to create a sum for post-retirement life, you have to be more calculative and cautious. Apart for inflation, you must consider possibility of your outliving your expected age and change in interest rates post retirement.

Scripbox recommends you revisit and recalculate your goals. You have to work with real numbers as only being a crorepati will not help.

Find all this too much? Don’t worry. Scripbox’s goal-based investment methodology allows you to not only plan what your future requirements could be but also how much you need to invest today to achieve that. We take all the guesswork out of your planning to ensure that you are more likely to achieve your goal.