What is MF lumpsum calculator?

LUMPSUM CALCULATOR

Total Investment (₹)

Expected Return Rate (%)

Time Period (Years)

Total Investment

Est. Returns

Total Value

LUMPSUM CALCULATOR

Have you been wondering how much your investment in mutual funds will grow into? You could get help from mutual funds lumpsum calculator. How exactly does this lumpsum calculator mutual funds help you? The MF lumpsum calculator is a quick view of how much your lumpsum investment in a mutual fund would have earned under certain assumptions. There are lumpsum calculator which you can access on the internet and get the output by just feeding in some basic details, which we shall see in detail later.


WHAT IS LUMPSUM?

The lumpsum investment is a one-time investment. It is the opposite of a SIP in mutual funds. In lumpsum investment, the investor invests in a particular scheme of a mutual fund in a single tranche. Lumpsum investing is quite popular among high net worth investors.


Lumpsum calculator helps estimate returns on lumpsum investment


A lumpsum calculator helps to estimate the likely returns you will earn or the corpus to which your initial investment will grow based on assumptions of tenure and returns. In a typical lumpsum calculator online, you fill necessary details and the calculator will approximate the maturity investment value and present it to you.



A prospective investor evaluating investments can use this lumpsum calculator to evaluate whether a selected investment option is meeting their financial goal or not at the end of a specific time period. This is very important when you need to pay for time-sensitive needs like your child’s higher education.


HOW TO USE LUMPSUM CALCULATOR?

The lumpsum calculator permits investors to plan and manage their finances better more efficiently and also more effectively. The advantage with using a lumpsum calculator is that it saves the time spent in doing manual calculations and reduces the chances of errors.


Additionally, the lumpsum calculator is very simple so anyone with some basic computer skills can use it effectively. However, there is a risk factor about lumpsum calculators you must be familiar with. At the end of the day, mutual fund investments are subject to market risks and no prediction can be done with absolute accuracy and remains an approximation.


Key inputs required in a lumpsum calculator


A typical mutual fund lumpsum calculator will give output online based on some key inputs given. Here are the key inputs that you need to provide to help the lumpsum calculator to do its job in a jiffy.

  • You must clearly define the amount of initial investment in rupee terms. This will be the starting point for your lumpsum calculator
  • The period for which you are willing and in a position to stay invested in that particular mutual fund. You can mention that in number of years.
  • The expected rate of return in terms of compounded annual returns that the investor expects. You can use last 5 year returns as reference point.
  • In the case of non-mutual fund assets like bonds, you can also input the frequency of compounding. It makes a difference as we shall see.

How the lumpsum calculator actually calculates the final corpus?


Lumpsum calculators use the basic compounding formula as under:


Final Corpus = {(Upfront Investment) X (1 + rate per compounding)} ^ total compounding


Now, you may wonder as to why the number of compounding or frequency of compounding is so important. You will be surprised but it does make a difference to the eventual corpus into which your upfront investment grows. That is what is displayed by the lumpsum calculator. Check out the tabulation of results for different compounding frequencies.


We assume an investment upfront of Rs.10,00,000 for a period of 5 years. The rate of return is at 12% annually. Let us see the corpus under different compounding scenarios.


Frequency of Compounding Value of Corpus – 5 years Incremental Advantage
Annual Compounding Rs.17,62,342 -
Half-yearly compounding Rs.17,90,848 Rs.28,506
Quarterly compounding Rs.18,06,111 Rs.43,769
Monthly compounding Rs.18,16,697 Rs.54,355

As you can see in the above table, the lumpsum calculator clearly brings out that even as you keep your investment, return and tenure same but change the frequency of compounding, there is a substantial difference to your eventual wealth created. That is eloquently brought out by the lumpsum calculator.


FREQUENTLY ASKED QUESTIONS

Difference between SIP & Lumpsum?


In a lumpsum you invest the total investment upfront. On the other hand, the systematic investment plan or SIP is a gradual or phased investment. Both are structurally and also conceptually different in terms of impact. Let us look at 3 such key differences between lumpsum and SIP investments in mutual funds.

  • A lumpsum investment is normally long term in nature and is also meant to meet your long term goals. However, in a lumpsum you are not immune to the market conditions since the commitment is already made. IN case of SIP, since your investment is distributed and phased, you are more immune to the vagaries of the markets.
  • You need a lot of money to do lumpsum investing. For example, if you want a lumpsum to grow to something worthwhile over 20 years, you need to start with a reasonably large sum to end up with a large corpus, even with benefit of compounding. However, in SIP, the investment is phased so you can put in small amounts over time. Also, SIP syncs with periodicity of income flows and is more efficient. SIP can be started with as little as Rs.500 per month.
  • The biggest difference is the availability of the advantage of rupee cost averaging. In lumpsum investing, the commitment to the investment is made once and for all. After that, you have little control over or concern over how the market moves. In SIP, the average cost reduces over time due to rupee cost averaging. When markets rise, you get more value and when markets fall you get more units. SIPs are advantageous both ways.

What is the Minimum amount required to invest in Lumpsum?


In a lumpsum investing, normally the minimum investment prescribed is Rs.5,000 for most AMCs. However, if you want to use the funds to create a substantial corpus, you need to invest a sizably large sum. For example, if you have a target of reaching Rs.1 crore in 20 years, at annual yield of 12%, then you must be able to at least invest Rs.10 lakhs upfront today to be able to get close to that figure of Rs.1 crore after 20 years.


Which is more advantageous- lumpsum or SIP?


If you are looking at financial planning, then SIP is more advantageous for 3 reasons. Firstly, SIP instils in you the discipline of regular savings and productive investment. Secondly, it syncs with the amount and periodicity of your income flows and makes financial planning more actionable. Last, but not the least, SIP gives you the added benefit of rupee cost averaging, which is beneficial in the long run.


Are mutual fund calculators accurate?


Mutual fund calculators are as good as bad as the quality of data fed into them. The mutual fund calculator only gives output based on the quality of inputs given. Think through the figures you are inputting in the mutual fund calculator for best results.


How to start my lumpsum mutual funds?


There are 3 steps to starting your lumpsum mutual fund investments.

  • Ensure that your KYC (know your client) is done. This is a one-time effort and is mapped to your PAN number. Once KYC is done, it is valid for all mutual fund investments.
  • Once KYC is done, you need to check if you already have a folio number with an AMC, which you can use. Else, you will be allotted a new folio number.
  • Then you fill up the form, either offline or online, and make the payment. Normally, the units are allotted to you in 3 working days.