The conversion of savings to investments becomes imperative for individuals looking to systematically reach their desired financial goals in the future. One can have various goals in mind, pertaining to their lifestyle, age and income, etc. It can be short term ones such as buying a car, foreign trip, luxury purchases or long term ones such as child education, buying a house, etc.
According to the kind of goal, one needs to decide whether to invest for the long or short term, which is when a sound decision regarding the kind of fund and mode of investment can be taken. If the individual is looking to go on the route of mutual fund investing, he/she has two options available – through SIP/systematic investment plan or through lumpsum investing. If one is a student or salaried individual, SIP is the best way to go as periodic investments become easier. But, suppose, one has a large reserve of money available or received from the sale of an asset or one-time income, then lumpsum investing would be a better option to choose.
In this case, there are certain parameters an investor needs to consider and then proceed – investing a huge amount of money at once would mean locking the amount for a long time and a premature withdrawal would mean an exit load and penalty.
Secondly, he/she can invest in debt mutual funds and systematically transfer partial amounts to equity mutual fund schemes when the market conditions are ideal for equity investments. This can be done with the help of STP or systematic transfer plan.
What is a lumpsum calculator?
In order to make decision making for lumpsum investing easier, online tools like the lumpsum calculator is available on the internet. It helps an investor to get an estimate of the returns and wealth he/she would create in the future after the investment time horizon. An investor gets the information required handy through this tool, which helps able to manage their finances better. The best part about the lumpsum calculator is that it eliminates the possibility of human errors as no manual calculation is necessary here. One just needs to enter the amount they wish to invest, tenure and expected returns, in order to receive the estimated values. For better understanding, let us consider an example:
Suppose, Ms. Kajal invested a lumpsum amount of Rs. 1 lakh over 30 years, looking to fulfil her long term goals. Her estimated corpus post this tenure would be Rs. 29,95,993.
Now, let us assume that Ms. Reena also invested the same amount but for 20 years, looking to fulfil her medium term goals. Then, her corpus would be Rs. 9,64,630.
In both the cases, we have taken estimated returns to be 12% p.a. Due to the power of compounding, the one investing for a longer period, gets the higher amount in corpus. These calculations were performed in seconds using the lumpsum calculator. It is a user friendly tool that helps to instil confidence in investors while making decisions pertaining to lumpsum investing.
However, contrary to general myth, tools like SIP lumpsum calculator or lumpsum SIP calculator does not exist. People tend to search for these tools as SIP and lumpsum are closely related methods of mutual fund investing.
Lumpsum calculator, its parameters, uses and more have been discussed in this article. We also gain meaningful insights on long term investing through examples.
