Mutual funds investments are considered to be safer than direct investment in stocks since fund managers manage your invested money and ensure you end up with good returns. However, choosing the correct mutual fund to invest in is something that an investor has to figure out. You not only need to look at the rate of return for the various schemes, but also take into account the duration of the investment its past performance.
A mutual fund calculator can be instrumental in determining the best mutual fund investments for you. It is not only easy to use but also readily available across most online mutual fund portals. Here is a look at how you can use a mutual fund calculator.
Procedure for using mutual fund calculator
A mutual fund calculator will tell you the kind of returns you can expect from your investments. However, you would need to specify certain parameters, so that that calculator can determine the return. These parameters include –
- Nature of investment- Mutual funds investment can either be through a systematic investment plan (SIP) or through a lump sum investment. You need to choose which kind of investment you will be using.
- Amount of investment- This is the principal sum that you are looking to invest. For SIPs, the amount of investment will signify the amount of periodic investment and not the entire sum.
- The frequency of SIP- This parameter is only relevant if you are investing through a SIP. You need to choose between the different options, such as fortnightly, monthly or quarterly.
- The expected rate of return- Here you need to enter the expected rate of return from the scheme you are looking to invest in. The figure will be in percentage and will determine the expected return on the invested sum.
- Duration- For lump sum investment, you need to enter the tenure of the investment. For SIPs, you need to mention the duration of the systematic investment plan.
Once you enter all of these details, you need to click on calculate. The mutual fund return calculator will give you an estimated return on the investment you are about to make.
Benefits of mutual funds calculator
Here is a look at why you should use the calculator, before investing in mutual funds.
- Easy to use
The calculators are very convenient to use and can help you compare the returns from various mutual fund schemes when you are looking to invest. This calculation helps in the decision-making process and allows you to form realistic expectations.
- Only details about the scheme required
The mutual fund return calculator is greatly advantageous since you only need to enter specific details about the scheme you are investing in. No other details are required apart from this information.
- Free to use
The calculator is available online and can be used innumerable times without incurring any additional charges.
However, keep in mind, that the calculator will only show an estimated return and not a guaranteed return. Changes in the market may affect the results for your investment.
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