A lump sum investment involves investing a large amount of money in one go, typically in mutual funds. It is a preferred choice for long-term investors, especially those with high-risk tolerance or receiving windfalls like bonuses or inheritances. While it can yield good returns if timed well, it’s important to align the investment with your financial goals, risk appetite, and time horizon. Since it may not suit short-term needs, consider your liquidity requirements before investing.
A lump sum calculator is a utility tool that helps you assess your wealth gain over the long-term. It is a smart tool to calculate the return on a lump-sum mutual fund investment. A lump sum calculator consists of a formula box, where you enter the investment amount, investment period in years, and the annual rate of return expected on the investment. The lump-sum calculator will show you the expected amount and the wealth gain in seconds.
a lump-sum calculator tells you the future value of your investment at a certain rate of interest, using the following formula:
FV = PV(1+r)^n
Where,
Let us assume that you have invested a lump sum amount of Rs 1,00,000 in a mutual fund scheme for 20 years. You have the expected rate of return of 10% on the investment. You may calculate the future value of the investment as:
FV = 1,00,000(1+0.1)^20
FV = Rs 6,72,750.
Henceforth, you have invested Rs 1,00,000 which has grown to Rs 6,72,750.
The wealth gain is Rs 6,72,750 – Rs 1,00,000 = Rs 5,72,750.
The ClearTax Lumpsum Calculator shows you the future value of your mutual fund investment in seconds. To use the ClearTax Lumpsum Calculator.
In conclusion, a lump sum investment can be a powerful tool for long-term wealth creation when used wisely. Just ensure it aligns with your goals and liquidity needs to make the most of your money.