The key benefits of using a lump-sum investment calculator include:
investment growth can be computed as the future value given the current investment, interval and rate of return.
Choosing the outcome that you want to achieve (eg, how much we need to put away so that we can retire at some point); or how much to save for one goal but not for another (eg, saving for your child to go to university, or saving for your first home deposit).
Consider an investment decision, for example, whether to put money in one place or the other. Here, the equation simply asks you to assess the returns that each one of these options might give, and so on.
Second, you need to assess – in other words, measure – the investment risk. And, depending on your own personality and your tolerance of risk, you need to put in place the right investment programme or, as it might be called, the risk-reward ratio.
The value of your lump sum investment in mutual funds at the end of any specified period depends on how the market does vis-à-vis your choice of funds, but all of the mutual fund lump-sum calculators make estimates of the returns from lump-sum investments based on exactly the same formula.
A few mutual fund lump-sum calculators estimate your investment value using a compound interest formula.
The formula used is:
A = P (1 + r/n) ^ nt
Where:
P= = the principal amount, or the initial amount of money invested.
r = rate of return = annual interest rate (expressed as a decimal)
n = times interest is compounded per year.
t = time period for which money is invested
To use the Lumpsum calculator, follow these steps: