Urban Money

Mutual Fund Calculator

Mutual Fund Calculator Online

Mutual Funds are an excelled tool for creating long-term and short-term wealth by contributing small chunks of monetary capital regularly towards the desired instrument. The wealth generated will be based on the market price and company performance, and thus, generally involves some risk or the other. Consequently, it becomes highly prudent to calculate the returns well ahead before investing. One such online tool that enables one to anticipate, plan, and prepare well is the Mutual Fund Calculator. A mutual fund calculator takes in relevant information such as investment amount, rate of return, and maturity period and computes the outcome in real-time then and there itself. 

What is a Mutual Fund? 

Mutual Funds are diversified funds coming in from various sources of investors that are pooled up for the purpose of capital appreciation. The funds are used in financial-gain instruments such as stocks, shares, bonds, and various other securities. These securities are expected to give greater returns in additional market value calculated over the securities price as per the date invested in. The difference is generally the added earning for an investor in excess of their investment. Even though mutual funds are dodgy instruments, they are still considered to be relatively lower in risk than their counterparts. This makes them an attractive candidate for experienced and beginner investors alike. 

Features and Benefits of Mutual Funds?

The investors, who are typically regular salaried professionals, seek safer choices of instruments when it comes to contributing their hard-earned money. And, mutual funds are exactly the kind of tool that offers them the much-needed peace of mind. Moreover, overseen by expert financial advisors, these mutual funds have several advantages when it comes to creating a future monetary resource with the risk element being taken care of. The experts, who are an integral part of Asset Management Companies, analyse the pros and cons involved with each financial vehicle they put investors’ money in. 

Risk Management 

Of the several benefits of investing in a mutual fund, the one benefit that stands out is its Risk Management. The funds being managed by Asset Management Companies that comprise hedge fund managers and mutual fund portfolio managers, the risks are pre-calculated based on the market performance of the companies’ shares and stocks that is in question. The historical share prices are studied and forecasts are derived beforehand, and these fund managers use the pooled money to distribute amongst these handpicked securities. 

Withdrawal Flexibility

Another great reason to consider mutual funds is their Withdrawal Flexibility. The highly liquid mutual funds offer their investors the flexibility to redeem their money whenever they require. Although it is highly advised to keep the money invested for the long term to maximise the profit margin, it is still possible that someone may need the money for emergency reasons.

Diversity 

Mutual funds are invested in such a manner that the rates balance out the market price fluctuations by being diversified. It means that the mutual fund contributions are ventured into several different company shares which helps out with the dynamics. When one share price is down, there could be other ones that are high. Eventually balancing out the whole in general. 

Small Investments 

Asset Management Companies allow customers to Invest in small amounts as well. This paves the way for novice and inexperienced investors to give the financial vehicle a chance. A minimal amount can also yield a fairly decent return over time. Another great option that involves a lesser investment amount is the Systematic Investment Plan (SIP). 

Accessibility

There is an added advantage of accessibility when it comes to mutual funds. There are various agencies and companies all around that help in investing in mutual funds. The brokers, registrars, Asset Management Companies, banks, financial institutions, online websites, etc. are to name a few. With easy availability, customers also get the opportunity to be aware of this tool better. 

Suitable for Many Goals 

Mutual Funds allow users to be free with goals and choose the investment amount they are comfortable in. One can dream of a house, an easy retirement, a car, a bike, or something short-term. Whatever the case may be, mutual funds are a great tool that can be flexible as per the goals. 

Color-Coding as per Risk 

Soon after the Securities Exchange Board of India (SEBI) recognised mutual funds, they revamped some policies related to it. Specific colors were assigned to the mutual funds based on their risk factor. For example, the blue colour indicates low risk, yellow indicates medium risk, and brown indicates high risk. 

Tax Benefits

The government of India has recognised mutual funds investments as an expense that can be claimed while filing tax returns. Under section 80C of the income tax act, users can claim up to INR 1.5 Lakhs. 

Types of Mutual Funds 

There are various types of mutual funds and that can get overwhelming. Investors have quite a job to do in terms of understanding what works best for them. It should be mostly the personal goals that should direct investors’ hunt for the ideal mutual fund. Furthermore, it also helps to understand the personal financial situation so as to assess the amount that can be supplied consistently. 

Mutual funds are distinguished among a few categories including composition, capital, investment, specialty, and risk. These categories cater to various subtypes as well. Some of the most common and popular kinds of mutual funds include equity mutual funds, money market funds, debt funds and Index funds. 

Mutual funds based on Capital

Some of the mutual funds based on asset groups include the following:

  • Equity Funds: These are some of the highly sought-after mutual funds that are viewed as high-risk high-return mutual funds. The monetary resources are allocated to the equity shares and bonds of a company. 
  • Debt Funds: A safe tool that ensures a fixed income. Debt Funds are mutual funds that are invested in fixed finance generating securities such as commercial papers, corporate bonds, T-bills and  government securities. The investor is liable to pay taxes for fund generation above INR 10,000 as there is no tax deducted at the source for this type of scheme.  
  • Balanced Hybrid Funds:  A mutual fund scheme where the capital is allocated in two ways. Some ratios of the funds go towards debts and some towards equity. Together, these are known as balanced funds or hybrid funds. The main motive of the investor is to diversify their portfolio and by doing so can immune themselves from the market price fluctuations.  
  • Money Market Funds: These are generally invested for short-terms with low to moderate returns pooled with low securities. The money market mutual fund schemes are usually allocated to the government debts such as treasury bills and municipal bonds to name a few. 

Mutual Funds based on Investments

Some interesting mutual funds based on investments are as follows: 

  • Growth funds: Risky investment options with high returns is usually the case with growth mutual funds. Investors use their funds to supply capital on equity stocks. Fund managers primarily look to exponentiate the capital value rather quickly. 
  • ELSS:  ELSS or Equity Linked Savings Scheme is a type of mutual fund that offers tax benefits under the Income Tax Act. Through ELSS, investments are made in equity shares and based on the market performance of the funds, these schemes also offer higher returns. 
  • Pension Funds: These are long-term funds that supplement a retirement income. The pension funds are invested in diverse portfolios to manage the market dynamics and cater to provide balanced returns overall. The returns can be taken out in part or in lump sum as well.  
  • Fixed Maturity Funds: These are duration-specific funds that are invested in debts and government bonds. The returns can be collected after the maturity period is over, and in some cases, before the date as well. 
  • Liquid Funds: 
  • Income Funds: A stable source for safe investing has to be Income funds. They are generally allocated on fixed income schemes such as bonds. Even though the risk and returns are relatively lower, the income funds assure value protection. 
  • Capital Protection Funds: The funds that are to be invested are bifurcated among fixed-income funds and equity bonds. The principal amount gets protection from the market rates in a way that ensures the originally invested capital returns to the owner. The part where equity is involved creates further gains. 

Furthermore, there are certain specialty-based mutual funds that are highly instrumental in creating wealth over time. Some of these mutual funds include sector funds, index funds, funds of funds, emerging market funds, international funds, global funds, and real estate funds. 

What is a Mutual Fund Calculator?

A mutual fund calculator is an online computing tool that intakes investment values and related numbers to generate an anticipated return amount. Although the tool is only meant to provide an idea-based figure, it is still imperative to use the calculator for planning ahead. The tool works efficiently and offers a chance to anticipate and work in advance with the financial allocations. Users will have an in-depth understanding of where they stand in terms of their monetary capacity and can construct decisions based on the same.  

How Does a Mutual Fund Calculator Help You?

Are you confused about how much capital to invest? Do you have a tight budget? Are you a salaried person or a businessman who's income is dynamic? What are your life goals? These are some of the questions that generally perplex a person while trying to decide on an investment step. A mutual fund calculator can help you decide on exactly that. How? Let’s say you want to explore a few different options of budgets with varied interest rates and maturity periods. You can make use of the Mutual Fund Calculator to incorporate all these possibilities and the tool will generate the data based on your figures. 

The data will show how much you will invest and how much gain you will receive at the end of the maturity period. This can give a larger picture of what your financial planning can look like. Consider your income and future expenses before beginning with the investment. Mutual funds do offer the flexibility required to adjust personal expenses. 

Mutual Fund Return Calculation with Example

There is a general formula that is used for calculating investment return based on the inputs provided by a mutual fund calculator user. The calculator can be adjusted for users who want to invest regularly with a small amount of money or who want to invest a lump sum straight away. Since the market prices are fluctuating and future prices are only assumed, the values generated from the mutual fund calculator are for references only. The formula for both lump sum and regular contribution is as follows: 

Lumpsum investment A = P (1 + R/100) T
Systematic Investment A = S [ (1 + I) t – 1] x (1 + I) / I

Here, A is the Total Amount after maturity 

P is the Principal Amount

R is the anticipated rate of interest

T is the Time or duration in years

In the second formula, 

A is the Total Amount after maturity

S is the Systematic Contributions

I is the rate of interest

T  is the time or duration in months 

For example, if one invests a monthly amount of INR 2000, for a period of 10 years with the expected rate of return at 12%. The Principal Amount will be INR 2,40,000 and the total amount after maturity will be INR 4,64,678. The year-wise breakdown is as shown below. 

Year  Principal Amount in INR Returns in INR
1st Year 2000*12 = 24,000 1,619
2nd Year 48,000 6,486
3rd Year 72,000 15,015
4th Year 96,000 27,670
5th Year 1,20,000 44,973
6th Year 1,44,000 67,514
7th Year 1,68,000 95,958
8th Year 1,92,000 1,31,053
9th Year 2,16,000 1,73,643
10th Year 2,40,000 2,24,678 

Frequently Asked Questions (FAQs)

What is the formula for calculating mutual funds?

Wealth generated from mutual funds can be calculated in advance with the use of a systematic investment formula represented by “A = S [ (1 + I) t – 1] x (1 + I) / I”. Here, the A is the total amount receivable, S is the total amount invested, I is the rate of return, and t is the duration in months.

Which SIP is best for 10 years?

Out of the various mutual fund investment tools that can be used for capital appreciation, the most popular choices for 10 year maturity period include ICICI Prudential Fund, SBI Opportunity Fund, Tata Digital India Fund, Franklin India Funds, and Aditya Birla Sun Life Digital India Funds.