When you are about to invest in mutual funds, you might face one major decision. Do you invest a lump sum now or a fixed amount every month? You can study the routes both thru a lumpsum calculator and a sip calculator. They show how your money could grow over time based on the information you input.
What is Lumpsum Calculator ?
A lumpsum calculator is for a one time amount. You enter the sum, time span and an assumed yearly return. The tool then shows the value that the sum could end up with at the end of the term.
Suppose you have 1 lakh rupees to invest for 5 years. You can plug that number in, and try a 10% per year return. The tool will provide an end result based on those inputs.
This tool can help to fit a plan when you have a big sum in hand already. The money could be from savings, a bonus or a deposit that has matured.
What is SIP Calculator?
SIP stands for Systematic Investment Plan. SIP allows an investor to invest a fixed amount in a mutual fund scheme at fixed intervals such as once a month, says AMFI.
There is a sip calculator for this plan. You type in how much you want to invest each month, the length of time and an assumed annual return. The tool displays the total amount paid and where it can be at the end of the term.
For instance, you might want to invest ₹5,000 per month for five years. The tool can show how those monthly totals could accumulate over that period.
How to Decide Between the Two
1. Check Your Cash Availability
Begin with your cash flow. If you have one big amount you want to work with, try our lumpsum calculator. If you plan to invest some of your salary each month, try the SIP tool.
2. Use same time period
Use the same word in both tools. If you test a five year plan in one tool, then use five years in the other one. This makes the test clearer.
3. Use identical return rate
Assume the same annual return in each case. If one tool uses 10% and the other 12% the results will not be a fair side by side view.
4. Count your change
Look at how much cash you have paid into each plan. SIP of ₹6 lakh should not be set off against a one-time ₹3 lakh. Test the two routes, keep the total cash close.
5. Interpret the result as an estimate
The results shown by the calculator are not guaranteed. SEBI says such tools are for illustration The rate of return on market linked funds is not fixed.
Don’t just pick a route because one screen has a higher end value. Begin by looking at how much money went into each case and when it was invested. On its own the raw end value does not give a direct comparison as the timing of each payment is different.
6. Change one input at a time
Try a different time span, a monthly sum, or return rate. Just change one thing in each experiment. This allows you to see what caused the change in the result.
Where Bajaj Broking Stands In
Bajaj Broking has a lumpsum calculator and a SIP calculator. The two tools on the same platform allow you to test each route. The lumpsum tool shows how a single amount can grow. The SIP calculator shows how a fixed amount every month can increase over a period of time.
Both tools can be used to compare the same term and rate without needing to do the maths. The result can be used as a simple basis for planning the quantity and the time frame.
Things to Keep in Mind
How and when your money is available should be your starting point. A lump sum and a monthly plan suit different cash-flow needs.
Also, don’t take the tool output as a fixed gain. Fund returns are subject to market fluctuations. The rate you put in the tool is just a guess.
Conclusion
A lumpsum calculator comes in handy when you want to test a one-time sum. If you plan to invest at regular intervals, a sip calculator can be helpful. Use the same time span and return rate to compare them. Also, check the total cash that was invested in each plan. Bajaj Broking provides both the tools, so the readers can try the two routes and see the results in one place.
