Mutual funds are being sold as a new get-rich formula. Is there a way to foresee the wealth it creates? Yes, only through the Mutual Fund calculator. This calculator projects an estimated return when you input certain details. A mutual fund as the name suggests is a relationship between the asset company and the investors based on mutually agreed terms and conditions. Investors like you agree to invest their hard-earned money in the mutual fund company with an expectation to grow their wealth. To say, it is firstly based on mutual trust, which comes from historical records of returns which is publicly visible to investors. Investors like you take cautious calls to select the best mutual fund investment company and choose the best mutual funds investment plans available.
Table of Contents
What is Mutual funds investment?
A mutual fund is an investment company that pools money from many people and invests the money in stocks, bonds, money market securities, and other securities. Mutual funds allow the small investor to purchase a diversified investment portfolio with relatively small capital. It basically pools money from all the investors, and invests them in various asset classes, to help you maximize your returns on the invested amount.
Do they do a free service to help you grow money?
Not at all, they charge you a service fee in the form of expense ration and commission for rendering this service. The mutual fund companies’ employees mutual fund managers with great expertise in managing wealth. Based on their expertise they promise you higher returns. 90% of the time their claim is true to generate higher returns, but sometimes there is a possibility of not being able to generate adequate returns due to various reasons. The whole game plan lies in the investment strategy. The future is unknown to even those who are well experienced, so there is no guarantee to earn a specified rate of return, but efforts are definitely made to make sure your wealth is maximized.
Is mutual fund investment a good choice?
Yes, mutual fund investment is a very good choice. If you are not an expert in the stock market or even if you are, mutual fund Sahi hai. There are various types of mutual fund plans to suit your needs and requirement. You do not need to be an expert to invest in it. It is a simple need-based investment with clear goals in mind. When you have decided to invest in mutual funds remember to choose a longer holding period so as to make use of the power of compounding. It even offers tax-saving plans for professionals who struggle to save taxes at the year-end. Before investing if you are unsure of how it works then take a look at the mutual fund calculator to know the estimated returns based on your investment plans. Refer to mutual fund Sahi hai.com to know more about this investment choice below
Is there a facility for online mutual funds investment in India?
Yes, of course, you can definitely shop for mutual funds online. Digital India is all about moving to an online mode of transactions. All the mutual fund companies have launched their respective apps to make it convenient for their customers to register and transact online. When you know your investments are just a click away, it surely gives you a lot of relief. The redemption process is also moved to online mode, thus at a click, you may get the whole investment proceeds transferred to your mentioned bank account.
Is mutual fund investment safe?
Yes, mutual fund investments are safe as it is regulated by the Securities and Exchange Board of India (SEBI). The grievance redressal system in place helps the customers to complain against the mutual fund company or any schemes. The grievance redressal is supervised by SEBI to make sure that complaints are addressed in a disciplined manner.
What is a mutual fund calculator?
A mutual fund calculator helps you to foresee the future. A future where you know with what amount of investment, and after how many years will your income multiply. Obviously, there are assumptions based on the annual rate of return but still, you get a taste of your future wealth right in front of your eyes in seconds. Remember the longer is the period of time, the higher will be your estimated returns. These returns are not after adjusting inflation, so do not be so happy if you see crores populating from the mutual fund calculator or MF calculator remember that money’s purchasing power now will always be higher than in the future. Inflation keeps squeezing the money’s purchasing power every year.
Lump sum return calculator
In this type of mutual fund investment, you stick to the plan of investing a fixed amount only once and being invested for a longer duration of time. Assume you got a bonus, so you may invest the lump sum bonus in a good mutual fund scheme and wait for it to grow.
For the Lump sum amount calculator follow the below steps to see your future estimated wealth:
- Input the lump sum amount
- Number of years you plan to hold the investment
- Rate of return – this information you may get from the historical mutual fund return data from any website like moneycontrol.
Sip calculator return calculator
A systematic investment plan or SIP as it is called is a very popular mode of mutual fund investment. In this investment, you simply select a date, and amount of investment and keep investing in the scheme chosen every month. This way you are not bothered about market conditions as timing the market is not at all possible. If you go on with the monthly plan of investment, your money will keep multiplying in the long run.
Now you might be wondering if SIP is so simple then why would people even prefer lump sum investment ever? The answer lies in the need, funds availability, requirement, and returns. If one is an experienced investor and chooses to invest in the bear market, the return will be twice higher than for a SIP investor. At other times also the returns for the lump-sum investors are higher than that of SIP investors.
Then why would you prefer SIP? To have disciplined investment to yield far better returns than a fixed deposit, or money idly sitting in your bank account. Besides in SIP mode you do not have to time the market, do not worry about market fluctuations, you just need to focus on not missing any SIP due for payments.
For SIP (Systematic Investment Plan) amount
- Input the SIP sum amount
- Number of years you plan to hold the investment
- Rate of return – this information you may get from the historical mutual fund return data from any website.
The forecasted amount at the end of the time period specified will depend upon the below factors:
- The entry time in any mutual fund scheme will depend upon the investor, mutual funds calculator will not tell the exact entry time.
- The exit time in any mutual fund scheme will depend upon the investor again. The mutual fund calculator will again not predict the exact exit time.
- The rate of return will be dependent upon the mutual fund scheme and its performance.
- The time period will again be dependent on the investor as to how long it wants to remain invested.
- The future is unpredictable and inflation is usually not taken into account.
Can a higher expense ratio squeeze your profits?
Yes, the expense ratio is critical when deciding to evaluate the right mutual fund investment scheme. You need to look at the expense ratio of a mutual fund carefully before you invest in them. When you run a business there are lots of expenses and overheads. These include administrative expenses, wages, sales expenses, promotional expenses, marketing expenses, advertising expenses, and broker commissions. The asset management business is no different. Therefore, when you invest in the schemes of a mutual fund you should remember that there are different types of expenses that a fund house will have and all these expenses are charged to the fund. This means that these expenses come out of the money that you give to the fund to manage. The expense ratio is expressed as a percentage of the total expenses to the total assets in the scheme. All expenses charged to investors are called the ‘total expense ratio’ (TER); it is an annual charge as a % of AUM. The lower the expense ratio, the better it is for you as an investor.
Example:- You invest Rs 100,000 for 25 years at a rate of 14% CAGR below is how your returns will look like considering different expense ratios:
1 – If the expense ratio is 0.1% then your returns will be Rs 20,00,000
2 – If the expense ratio is 1%, then your returns will be Rs 17,00,000
3 – If expense ratio is 2.5%, then your returns will be Rs 12,00,000
So, you see the difference in the return amount. The expense ratio does eat into your final return amount. The lower the expense ratio the better returns you may expect to earn. Be careful when you choose a mutual fund plan, do not forget to take a close look at their expense ratio. Direct plans always offer lesser expense ratios as compared to regular mutual fund plans.
What are the benefits of investing in mutual funds?
Here’s a list of all the good things about mutual funds which make them so attractive choice of investment:
- They’re the easiest way to manage your funds professionally.
- Protected against the volatility of markets to some extent.
- Easy diversification of your investment portfolio.
- If you’re someone who does not want to spend their days worrying about investments, then mutual funds are for you.
- There are different types of mutual funds to suit their needs and financial goals or budget.
What are the disadvantages of mutual funds:
A mutual fund scheme is not a 110% sure profit game, there are flaws to it as discussed below:
- The expense ratio will eat up your future returns.
- There is an exit load in case you want to withdraw your investment before the lock-in period specified by them. The exit load is like a penalty for withdrawing your investment before time.
- You might not see positive returns, especially in the case of SIP investments until the 3rd So do not get angry at the decision or withdraw your investment out of fear. Investment growth takes time, remember Warren Buffet – he became known only in his old age when compounding magic worked for him to grow his wealth manifold times.
- You may not receive huge capital appreciation had you invested in stock personally.
- Sometimes the fund may not perform well, and you may not see any capital appreciation at all. This is rarest when your holding period is high.
Well, it’s a double-edged sword with merits and demerits.
How accurate is the mutual fund calculator?
The output is based on the inputs you enter. Now the amount of investment is it lump sum amount or SIP amount is determined by you. The time period for which you want to remain invested is also decided by you. The only thing which is assumption-based is the rate of return. You may determine the possible rate of return after taking into account the historical rate of return of that particular mutual fund scheme. Again, just to remind you the estimated returns are excluding adjustments for inflation. These 2 factors may go a long way in determining your future final corpus amount. To be on the safe side, always expect a minimum rate of return ranging from 11% to 14%. Do not exceed this return percentage, but if you want to be happy then try putting a higher return percentage just to check how much is the difference in the estimated returns. I know, you will hope the amount comes true.
The mutual fund calculator will give you an estimated return which is highly dependent upon 3 inputs from you. The final amount that it reflects may not have that much purchasing power because inflation is ignored while calculating the estimated returns. It is always advisable to use the mutual fund calculator to decide the optimum combination of the investment amount and the holding time period so as to achieve your financial goal. Consider as your financial planning tool which shows you the future and yes brings a smile to your face.
The United States tops the list of the countries with maximum mutual fund industries worth $23.9 trillion, followed by Australia with $5.3 trillion and then Ireland with $3.4 trillion.
Do try the mutual fund calculator, it will surely bring a smile to your face!