How to use a Mutual Fund Calculator to Optimize your Investment Strategy and Maximize Returns?

John Tyris, content writer | Friday, 03 March 2023

When attempting to achieve investment objectives, mutual funds are an excellent choice. Various mutual funds are available, allowing investors to make significant returns. In addition, you can quickly determine the capital gain and maturity amount of your mutual fund investments with a mutual fund calculator.

What is a Mutual Fund?
A mutual fund is an investment program professionally managed and maintained by an asset management company (AMC), which acts as a middleman for ordinary investors.

Some of the mutual fund options for equity:
1. Large-cap, small-cap, and mid-cap funds.
2. Value funds
3. Index funds
4. Growth funds

Some of the debt funds options for mutual funds:
1. Income funds
2. Money market funds
3. Ultra short-term funds
4. Short-term and medium-term income funds
5. Fixed maturity plans

What is a Mutual Fund Calculator?
You may determine the returns from mutual fund investments using the mutual fund calculator, a
simulation. In addition, you can evaluate its maturity value if you invest in a lump sum or via a SIP.

Even before you invest the money, a mutual fund calculator is a simple-to-use tool that enables you
to obtain a sense of the maturity value of the mutual fund investment. Given that you already know how much money you will receive upon maturity, it enables you to plan your spending and meet your financial objectives.

For example, when calculating the maturity amount for an estimated rate of return on the investment, you can specify the SIP amount, duration, and frequency.

The formula box on the mutual fund calculator allows you to choose the type of investment. Either make a one-time payment or a series of fees. To determine the maturity amount, you choose the investment amount, rate of return, and length.

If the investment is a SIP, you decide on the SIP's size, frequency, length of time, and estimated rate of return. Then, the mutual fund calculator displays the investment's value upon maturity.

How does a Mutual Fund Calculator work?
A mutual fund calculator operates in two ways:
1. One-time investment - You can invest a one-time amount instead of making small payments. To use this calculator, you must enter information such as the investment amount, the duration of the investment, and the estimated rate of return. The calculator will
then give you the outcome right away. The formula for this calculator is: Future Value = Present Value (1 + r/100)^n

2. SIP investment - You can make payments in small instalments at regular or fixed intervals. You must enter a few pieces of information to use this calculator, including the monthly contribution amount, the length of the investment, and the anticipated rate of return. The formula for SIP investment would be: FV = P [(1+i)^n-1]*(1+i)/i

How can a Mutual Fund Calculator help?
Evaluating your return on investment before investing in a mutual fund plan is a good idea. A mutual fund calculator is a perfect tool for this task because it is straightforward. You won't have any issues using it, even if it's your first time. Some advantages of using a mutual fund calculator are listed below:

1. It can offer a total estimate for investment horizons of 1, 3, and 5 years.
2. The estimated returns help you plan your financial strategy for the future.
3. It saves time and avoids mistakes when performing computations by hand.
4. Provides a return on investment estimate that is reasonably accurate.
5. Additionally, it makes it simple to compare investment returns.

Wrap Up
Making the appropriate investments is essential for achieving financial objectives. Therefore, it would be best if you considered using mutual funds as an excellent choice to help you reach your financial goals. There are numerous mutual fund plans as well. You must research them and choose the one that matches your risk tolerance and investment goal.