What is mutual fund calculator and how it works

A mutual fund calculator is a free online tool that can help you calculate returns on your mutual fund investments and predict the future value based on your current investments, expected return on it and the investment time horizon.

A mutual fund calculator also helps you plan your future financial goals. Most of the time, you may know that how much you need after a certain number of years to meet a goal. But what you do not know is the lumpsum or SIP amount that is to be invested to meet the goal.

Mutual Fund calculator tells you exactly the amount that is needed to be invested in lumpsum. In case you do not have lumpsum amount to invest, then you can calculate the SIP investment amount using a SIP calculator. SIP calculator will ask you to input the goal amount, number of years after which you want to achieve the goal and the return you expect on your SIP investments.  Basis this input the SIP calculator will tell you the monthly SIP investment amount.

There are some mutual fund calculators which will first ask you whether you want to invest in lumpsum or SIP, accordingly, they will ask you to input the details.

The benefit of a mutual fund calculator is as follows

It does the calculation in seconds which is not possible manually

The calculation is always correct

It helps plan your investments as you know how much you will get after a certain number of years based on an assumed rate of return. You can input different rates of return so that you know the difference in final corpus amount between the two rates

It helps plan your goal as using the above calculator you know exactly how much to save monthly

Since mutual fund calculator gives a direction to your investment planning, you can invest better and in an informed manner.

Now that you know how useful the mutual fund calculator and the SIP calculator is, you might have a question what kind of funds you should invest in to meet your investment objectives.

As you may know that broadly mutual funds are classified in 5 types –

Equity Funds, Debt Funds, Hybrid Funds, Solution Oriented funds and other funds.

In other type of funds, there is an emerging popular category of funds, known as Exchange Traded Fund. Also known as ETF, Exchange Traded Fund are instruments which invest in the basket of securities that reflects the composition of market indexes like Nifty, Sensex etc. Like any mutual funds, ETFs are also managed by Asset Management Companies (AMCs). Units of Exchange Traded Fund are listed on stock exchanges, and you need to have demat and share account to invest in ETFs.

Why we are highlighting ETFs for your investments is because of the following reasons –

Lower Cost: ETFs are passively managed thus the expense ratios are much lower than actively managed funds. Funds with lower expense ratio will give higher returns and that is the biggest advantage of ETFs.

Exposure to market risk only: Since ETFs track a market index, they are exposed to market risk only unlike actively managed funds which is either overweight or underweight to certain stocks / sectors relative to the benchmark index.

Efficient and safe way of investing in Gold: Through Exchange Traded Fund you can also invest in Gold. Gold ETFs is safe and efficient way of investing in Gold.

Comments are closed