## TOTAL INVESTMENT

**0**

## WEALTH GAINED

**0**

## MATURITY VALUE

**0**

## What is a Mutual Fund Lumpsum Calculator?

If an investor wants to estimate the returns that will be made by him through a lump sum mutual fund investment, a mutual fund online lumpsum calculator can help you to do the same.

A mutual fund lump sum calculator provides the maturity amount for a given present value lump sum investment. It provides the value of the wealth gained during the tenure of investment for the amount invested at the beginning of the period.

An investor needs to enter the lump sum or one-time investment amount, number of years, expected rate of return to get the earning on the investment and maturity amount

Example- If an investor has Rs 2 lakh in hand and wants to invest. But before investing the lumpsum amount he wants to evaluate the investment options and the wealth that can be gained out of each investment he must use a mutual fund lumpsum calculator.

He must first decide the period for which he wants to invest and the return that he expects from the mutual fund investment. He just needs to enter this lumpsum amount of Rs 2 lakh, the period of investment say 3 years and the expected returns say 15%. The online calculator will calculate the wealth or return gained i.e Rs 1,04,175 and the maturity amount i.e. Rs 3,04,175

However, the expected wealth to be gained and return earned is just an estimation and does not assure or claim the values calculated. Actual returns might vary depending on the performance of the mutual fund in which the amount is invested. It can be either higher or lower than the estimated return based on the current performance of the mutual fund and the underlying assets.

## Nature of Investment in mutual funds (SIP/ Lumpsum)

An investor can choose to invest in mutual funds in 2 ways. He can make a lump sum investment in a mutual fund scheme. He can either invest through SIP a fixed amount at a fixed interval say monthly or quarterly.

### 1. Lumpsum

An investor can invest a lump sum amount in a mutual fund scheme. This option of investment is opted by an investor who has received a lump sum amount from the sale of an asset or so.

Investing a huge amount at once can be risky and lock your money, a premature withdrawal would mean an exit load fee and penalty. Hence, an investor must rethink about all the parameters and then invest

An investor can invest systematically over a period of 12 months using a systematic transfer plan or STP. In STP, a fund house allows an investor to invest a lump sum amount in one scheme and transfer regularly a predefined amount into another scheme.

STP or systematic transfer plan is an automated way to transfer money from one mutual fund to another. This plan is ideally chosen by investors who want to invest a lump sum amount and avoid market-timing risk and leverage out the market fluctuation.

Mostly, the investor who has a lumpsum amount and at the end wants to invest in equity-oriented mutual funds chose this option. The lumpsum amount is invested in debt mutual funds and systematically transferred to equity mutual funds when the market is ideal for an investor to invest in equity mutual funds.

### 2. Systematic Investment Plan (SIP)

A Systematic Investment Plan (SIP) is a facility offered by mutual funds wherein an investor can invest in mutual funds a predefined amount at regular intervals i.e. monthly, quarterly or annually This way an investor builds a habit of saving and investing without worrying about a one time outflow of money. The fixed amount can be as low as Rs 500. SIP provides an investor the benefit in the long-term due to the average costing and power of compounding.

## How the Mutual Fund Lumpsum Calculator helps you?

The mutual fund lumpsum calculator is an easy to use tool which provides an investor the wealth gained and maturity value for a given investment amount, investment period and expected returns from the investment.

For a prospective investor, it is important to estimate whether the investment option selected will meet the financial goals at the end of the investment term or not.

Our mutual fund lumpsum calculator provides both, SIP calculator and a lump sum calculator. An investor can use it to calculate returns under both the approach, lumpsum, and SIP.

The mutual fund lumpsum calculator helps an investor to get an estimate of the returns and wealth he would create in the future for a given investment period.

- A calculator provides an investor with the flexibility to change the period, amount, rate of return and get an estimate of returns. An investor can set multiple combinations of an amount to be invested, tenure, rate of return and then decide what is the optimum combination.
- With a financial goal in mind, an investor can use the calculator and find out if his/ her goals are being met or not.
- The calculator is very simple and easy to use. An investor only needs the information required handy
- An investor will be able to manage his finances better once he has an estimated idea of their investment.
- It saves time for the manual calculation to be made by the investor and also helps in avoiding errors.

## How Does a Mutual Fund Lumpsum Calculator Work?

The mutual fund calculator is easy and simple to use, an investor just needs to enter the required details and the calculator calculates the earning on the investment and the maturity amount

- The amount of lump sum money you are willing to invest in a mutual fund
- The period for which you want to be invested in the mutual fund
- The expected rate of return that the scheme might earn

Once the above variables are entered, the calculator will provide the future value of the investment amount.

## The Formula to Calculate Mutual Fund Returns

Mutual funds invest in a wide range of assets such as shares and stocks, bonds, money market instruments, treasury bonds, and other assets. The attempt of the fund managers is to produce capital gains or profitable returns for the investors. The returns depend on the performance of the underlying assets.

The types of returns on a lump sum mutual fund investment

- Total return
- Annualized return
- Trailing return
- Rolling return
- Absolute return
- Point to point return

CAGR is the most common method to calculate mutual fund returns. It refers to the compound annual growth rate. This method is used to calculate the return of mutual funds having a holding period of greater than a year to reduce the short-term fluctuations and volatility of the NAV.

The lumpsum mutual fund calculator uses the compounding of return method to compute the estimated return on investment. It is a measure of the annual growth rate of a mutual fund over a period of time with the effect of compounding

The formula for CAGR is shown below

CAGR = (ending value/beginning value)^(1/number of years or months)-1*100

- Ending value of the investment made
- Beginning Value of the investment made
- Number of years or months of the investment

To calculate mutual fund returns through the CAGR formula, the following details are needed.

- The NAV at which the investment was made
- The NAV at the end of the investment period
- Investment period

Let us understand the concept better with the help of an example:

Mr. Arun invested Rs 100,000 in the year 2018 for the NAV of Rs 50. In the current year 2020, the NAV is Rs 60. Here, the NAV has appreciated by 20%.

Here's how the CAGR formula will work to calculate the return earned:

CAGR = (Ending value/Beginning value)^(1/Number of years)-1*100

Putting values in the above formula:

(60/50)^(½)*100 = 9.54%

The return earned can be calculated by considering the holding period in months. The result will be the same.

CAGR = (ending value/beginning value)^(12/number of months)-1*100

(60/50)^(12/24)*100 = 9.54%

## How to use the Mutual Fund Lumpsum Calculator?

Scripbox mutual fund lumpsum calculator is available on our website. Calculate the return on investment via periodic SIP or lumpsum in mutual funds

Follow the below-listed steps to get the maturity amount and estimated earnings

- Visit our website.
- Select the type of investment type. You can choose among the two approaches i.e lumpsum investment or target amount

### Lumpsum Investment approach

A lump sum investment approach can be selected if an investor has received a lump sum amount or has a spare large amount that he/she would not need in the near future. And he/ she has ensured the cash flow with the available funds with him/ her

The lumpsum calculator will provide the maturity amount of the present value of the lumpsum investment after the investment period for an expected growth rate.

- If you know the lumpsum amount available to you, select ‘Lumpsum Investment’ approach
- Enter the lumpsum investment
- Enter the investment period in years
- Enter the expected return (%)

You will be provided with the wealth gained and maturity value

**Example**

Mr. Arun wants to invest a lump sum amount of Rs 50,000 for 5 years with an expected return of 15%. The estimated wealth gained is Rs 50,568 and the maturity amount is Rs 1,00,568.

### Target Amount approach

The target amount approach is ideal for an investor who has a financial goal in mind to be achieved at the end of the investment period.

The online calculator will provide the present value of the amount to be invested today to ensure the targeted maturity amount is achieved if invested for a defined number of years and the expected growth rate.

- If you have already decided the financial objective and the target amount you want to achieve at the end of the tenure, select ‘Target Amount’ approach
- Once you have decided your approach, enter the target amount you have in mind to achieve from this investment
- Enter the investment period in years
- Enter the expected return (%)

You will be provided with the initial amount to be invested, the wealth you will gain.

**Example**

Mr. Arun wants to earn Rs 500,000 at the end of 5 years and expects a growth return of 15%. He wants to know how much he must invest today.

He will have to invest Rs 2,48,588 and he would gain a wealth of Rs 2,51,412 for a maturity amount of Rs 500,00 at the end of 5 years

You can also refer to the ‘Mutual Fund Investment Chart’. This chart provides a visualization of the maturity amount over the tenure of investment. It is a ready tool to understand the year in which the wealth gained is higher.

## What are the benefits and advantages of mutual fund lumpsum investments?

Benefits of mutual fund lumpsum investment

- A lump sum or one-time investment is more convenient. An investor invests once and free for years to come rather than worry about installment dates and saving every month to invest
- The financial goal of an investor is to invest for a long term say 10 years and above
- The investments are made in the underlying assets in a mutual fund. These assets provide a better return in the long term. The earlier the investment is made, the higher will be the return on maturity

Disadvantages of mutual fund lumpsum investment

- Investing lump sum does not bring an investment discipline in an investor. Once an amount is invested, the investor might settle down even if there is scope for saving some funds and sparing it for a regular investment
- Since the investment is done only once, an investor might not be able to make most of the market fluctuations. With a regular investment, an investor can balance out the ups and downs of the market
- If a lump sum amount is invested at once, the amount is locked for the lock-in period selected. In case of emergencies, an investor might be left with no or lesser options to manage funds and end in a loan.

## What are the differences between mutual fund lumpsum investments vs. SIP?

The key differences for an investor to choose between mutual fund lumpsum investments vs. SIP are listed below:

- The famous concept rupee cost averaging is an important decisive factor in differentiating both the approaches of mutual fund investments. When an investor invests in a phased manner i.e. a systematic investment, his investments get a higher NAV when the price goes up and more units allocation when the price goes down i.e lower NAV.
- The market movements and volatility for a set of assets or the industrial sector is near to impossible. The SIP approach averages out market movement as the investment period is spread out.
- The allocation of units is based on the NAV of the mutual fund on the day of investment. When an investor invests a lump sum amount, the units will be allocated based on the NAV one-time. So the investment is blocked for that NAV irrespective of the ups and downs of the prices of the assets and mutual fund NAV
- On the other hand, when an investor invests through SIP, the units are allocated at the price or NAV prevalent at each installment of the investment. This gives the investment advantage of the market movement.
- On maturity, the final wealth gained will be the number of units available and the NAV at the time of selling the units. A higher number of units of mutual funds would mean a higher wealth gained. An investor must choose an investment approach which provides a higher number of units
- The basic difference between lumpsum mutual fund investment and SIP is about the approach. The lumpsum investment is about the timing of entry, a continuously growing market would help avoid volatility whereas a falling NAV market can provide a negative impact on investment.
- The SIP investment approach is about discipline and rule-based investment to make the investment immune to market fluctuations

Few other differences between both the approaches

Particulars |
Lumpsum Investment |
SIP Investment |

Cashflow | One-time | Regular, fixed or variable |

Flexibility | Low | High |

Cost of investment | High, in-time huge investment | Low, due to rupee cost average |

## Frequently Asked Questions

The difference between SIP and lumpsum is the number of times an amount is invested. In SIP a fixed amount is invested at a fixed interval while in lumpsum you invest one-time and stay invested. The SIP option provides you with the flexibility to change the intervals, amount later during the course of the investment. With a lump sum, you invest one time and this big amount generates returns from day 1. However, you must be careful enough before investing a huge amount as mutual funds are subject to market fluctuations

You must prefer lumpsum investment if you have received a lump sum amount and would like to invest in mutual funds you are well aware of the market and the historical trend of the mutual fund scheme.Alternatively, you can invest systematically over a period of 12 months using a systematic transfer plan STP. In STP, a fund house allows an investor to invest a lump sum amount in one scheme and transfer regularly a predefined amount into another scheme.STP or systematic transfer plan is an automated way to transfer money from one mutual fund to another. This plan is ideally chosen by investors who want to invest a lumpsum amount and avoid market-timing risk and leverage out the market fluctuation.Mostly, the investor who has a lumpsum amount and at the end wants to invest in equity-oriented mutual funds chose this option. The lumpsum amount is invested in debt mutual funds and systematically transferred to equity mutual funds when the market is ideal for an investor to invest in equity mutual funds.

A lump sum option is suitable for a mutual fund that has a good credit score i.e. AAA or AA+, has performed over and above the benchmark returns compared to the mutual funds in the same category.The mutual fund has performed consistently based on historical returns and has performed relatively well even when the market is facing a downward trend.This shows how well the underlying assets have performed when other funds were facing negative fluctuations due to market trend. You can also choose to invest in a debt mutual fund for lumpsum investment.However,it is always advisable to consider SIP or a systematic transfer plan STP.

You can visit our website, create your account and explore the investment plans and decide based on your financial goals. Scripbox will provide you with recommendations of mutual funds based on your financial goals and help you optimize your investment.

An investor can invest in mutual funds in 2 ways either by investing a lump sum amount or through a systematic investment plan i.e. SIP. In a lump sum mutual fund investment, an investor invests once and the amount remains invested for the desired investment period. A lump sum mutual fund investment is a better option for investors who have a long term plan of 10 years or above and have a knowledge of the market.Though mutual fund SIP is more attractive as it does not hit the liquidity of funds at once for an investor. But investing a lump sum amount has its own benefits and disadvantages. A thorough understanding of the underlying assets in a mutual fund and historical returns during market slumps and rise must be gathered before making a decision.

To summarize, be it a lump sum mutual fund investment or a regular and fixed SIP, investing must be an important financial goal to achieve. An investor must choose between both the approaches based on his liquidity condition. Lump sum investment is a straight way ahead for investors who understand the market and its positions, stay invested for longer, hold their anxiety during losses and hold till the goal end period. Another option is for an investor to invest in a liquid fund and start an STP from liquid fund to equity fund.SIP mutual fund investment is a way for investors who have a fixed and regular source of income, want to develop a saving discipline and slowly enter the market.