Mutual funds in India have been evolving and emerging as one of the top investment options, highly preferred by investors due to the benefits of hassle-free investing and professional management. When it comes to a new retail investor in the market, he/she has a variety of options to choose from, depending majorly on their risk bearing capacity and financial goals. Another reason for the growing popularity of mutual fund investments is its ability to exponentially grow over time with the magic of power of compounding. This simply implies that the returns earned is reinvested to later earn returns on returns. Thus, the power of compounding acts as a money multiplier strategy in mutual funds.
To add to the list of benefits or rather facilitate mutual fund investing, freely available online financial calculators can be used. These are tools for those investors who are looking to understand what they can expect from the investing process in the future. Though the figures generated by these tools are an estimate, it helps individuals in making a financial plan that is sound and informed.
A variety of these calculators are used, based on the kind of investment you undertake – it can be periodic investing with SIP (Systematic Investment Plan) or one-time investment with lumpsum. Regardless of the method, you can understand how to go about the process or how much to save from today, with the help of tools such as the lumpsum calculator.
Suppose, one invests Rs. 5 lakhs today in chosen equity mutual fund schemes for a period of 10 years. Assuming the rate of return is 12% p.a., the expected corpus in this case would be more than Rs. 15 lakhs. With the help of lumpsum calculator, one can reach this estimate and plan their finances accordingly.
Since SIP and Lumpsum are two sides of the same coin, people tend to get confused and end up searching for lumpsum SIP calculator. But, there is no tool in that name. They are separate calculators, serving different purposes.
In this context, another useful tool is the retirement calculator. When a person is earning, it is best to start sizing up expenses and putting apart funds for reaching your desired retirement corpus. Retirement planning is ideally a lifelong process which includes strategizing, allocating, saving and investing, to finally reap the benefits when you are no longer working.
A pension plan calculator or retirement calculator can tell you how much to save from today, to reach your desired retirement corpus after a certain tenure. Let us understand better with an example:-
Suppose Vinita wants to have a retirement corpus of Rs. 2 Crores to meet her post retirement expenses. We are assuming that her current age is 35 years, and she wants to retire at the age of 60. We also assume that she already has a savings of Rs. 500,000, the expected rate of return is 12% p.a. and the inflation is 5%. We can safely conclude that the monthly savings needed to reach her goal would be Rs. 33,051. This calculation was done in seconds using the retirement calculator.
In this read, we focused on user friendly financial tools like the lumpsum calculator and retirement calculator that helps to instil confidence in investors so that they can make informed investment decisions and invest in mutual funds.