This calculator is an automated tool that does all the complicated math for you. An investor usually needs to enter the following details into the tool:

• The quantum of the investment
• The period for which they are willing to stay invested
• The expected rate of return that the investor assumes investments is predicted to earn

Once the above inputs are made, this calculator will calculate the future value of the investment.

Lumpsum Calculator Formula to calculate mutual fund returns

Lumpsum calculators use a specific formula to compute the estimated returns on investments. It is a compound interest formula with one of the variables being the number of times the interest is compounded in a year.

fv = P (1 + r/n) ^ nt
Here,
fv = Future Value
P = Present value of investment
r = estimated rate of return
t = tenure
n = number of compound interests in a year

As stated earlier, an investor can choose to invest in mutual funds via two methods – SIP or lump-sum. Let’s understand these two investment methods in detail:

• Lumpsum investments
  Under a lumpsum investment, an investor invests a certain sum in a single transaction. However, it could be risky if you decide to invest a significant corpus at once.
  To avoid this, investors can choose to invest systematically over a period of time using a Systematic Transfer Plan, also known as STP. STP is an automated way of transferring a pre-defined amount of money regularly from one fund to another. This process is usually chosen by those investors who wish to make a lumpsum investment but also want to avoid the risk of timing the market and leverage market volatility.
  Or, it is chosen by those investors who have a lumpsum amount and wish to invest in equity-oriented mutual funds. The lumpsum amount is invested in debt funds and systematically transferred to equity funds when the market is ideal for investments in equity mutual funds.
• SIP investment
  Under SIP investments, an investor invests a fixed amount of money in a particular mutual fund scheme at regular intervals. The investment amount, tenure of the investment, and the periodicity of the investments is predetermined.
  Under the SIP investment methodology, an investor can invest as low as Rs500. The periodicity of these investments can be daily, weekly, bi-weekly, monthly, quarterly, or annually. This builds a regular savings habit in the investor and also instils a sense of financial discipline.
  Investors who invest via SIP also benefit from rupee cost averaging, which means that they can buy more units when the prices are low and vice versa. This helps them average out the cost incurred to purchase a single unit of a mutual fund scheme.