If you have recently received your bonus, it can be a great opportunity to give your investments a boost. Instead of letting the money sit idle in your bank account, you can make it work harder by investing it in mutual funds. Before deciding, it’s important to weigh the benefits of all the options available. There are many mutual fund investment tools present at your disposal. These tools like a lumpsum calculator can give you a estimated idea of how your investment could grow over time, depending on how much you invest, where you invest, and how long you stay invested.
What is a lumpsum calculator?
A lumpsum calculator is one of the key mutual fund investment tools available online that estimates the future value of a one-time investment in mutual funds. All you need to do is enter three basic inputs – the amount you wish to invest, the expected rate of return, and the investment horizon (in years). Based on this, the calculator gives you a projected value of your investment at the end of the period. This makes it a useful tool for setting expectations and planning better.
Why consider equity mutual funds for a bonus investment?
If you are an investor with a longer time horizon and can handle short-term ups and downs, equity mutual funds can be a suitable fit for you. Equity mutual funds invest in shares of companies and have the potential to offer higher returns over the long term.
If your bonus is a substantial amount that you don’t need for immediate expenses, investing in equity mutual funds through a lumpsum route can help you benefit from market growth over time. Using a lumpsum calculator for equity mutual funds can help you see how your investment may grow in different market scenarios.
How to use a lumpsum calculator for equity mutual funds
Using a lumpsum calculator to calculate equity fund returns is fairly easy. Here’s a step-by-step guide:
- Enter your investment amount – this is the bonus amount you want to invest.
- Choose an expected rate of return – this is usually based on historical performance of equity mutual funds (a common assumption is 10-12% annually*).
- Select the time – the number of years you plan to stay invested.
Once you enter these values, the calculator will show the estimated future value of your investment.
*Past performance may or may not be sustained in future.
Benefits of using a lumpsum calculator
Here’s how a lumpsum calculator helps when investing a bonus:
- Sets realistic expectations – You can see how your money may grow over time, helping you set clear investment goals.
- Helps compare options – You can input different return rates or timelines to understand how equity funds typically compare to other asset classes.
- Supports better planning – If you have a target amount in mind (e.g., for a home down payment or child’s education), the calculator helps you work backwards to estimate how much to invest.
Points to keep in mind before investing
Before you invest your bonus in an equity mutual fund, consider the following:
- Match fund type to your risk profile – Equity funds come in different categories like large cap, mid cap, or small cap. Each has a different risk-return profile.
- Have a time horizon of at least 5 years – This gives your investment time to ride out short-term volatility and benefit from market cycles.
- Diversify if needed – Depending on the amount, you might want to diversify across fund types rather than investing all in one.
And always ensure you’re investing based on your goals and financial situation, not just short-term market trends.
Conclusion
Your bonus can be more than just extra income; it can be a stepping stone to long-term financial growth. With a thoughtful approach and the help of mutual fund investment tools like a lumpsum calculator for equity mutual funds, you can turn this one-time amount into something meaningful for your future.
You don’t need to be a market expert. Just be clear about your goals, choose the suitable fund, and use the calculator to guide your decision.
Note to readers: This article is part of HT’s paid consumer connect initiative and is independently created by the brand. HT assumes no editorial responsibility for the content, including its accuracy, completeness, or any errors or omissions. Readers are advised to verify all information independently.
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