Mutual Funds are financial vehicles set up by collecting money from investors who have the same investment goals. The money pool is then invested by the fund manager concerned to buy equities and bonds, with the intent of compounding the corpus over time. In lieu of the investment made, each investor is allocated units that act as a portion of the holdings in the fund.
Thereafter, the gains compounded are distributed proportionately among the investors after deducting the expenses incurred.
A Mutual Fund Calculator is a tool that computes the maturity value of a Mutual Fund investment, based on certain parameters. These include, the amount that is to be invested in the scheme, and the expected rate of returns, amongst others.
Thereafter, the potential investor gets to see the lumpsum his investment shall compound into. This computed projection helps potential investors budget their expenses and consequently set aside the amount that needs to be diverted into the scheme to achieve their financial goals.
As already discussed, the investor needs to feed into the BFC Mutual Fund Calculator, the inputs needed for arriving at the desired projection, such as the investment tenure, the amount that is to be diverted into the scheme, and the rate at which the investor is hoping to fetch returns.
The user needs to hit the “Calculate” button after feeding these inputs into their respective fields, following which the estimated compounded corpus shall start reflecting on the screen. Users can play around with all sorts of permutations and combinations to arrive at the desired output, and thereby align their finances to meet their monetary goals.
Most investment options carry risks, as they are directly or indirectly affected by the fluctuations of the equity and debt market. The risks involved in Mutual Fund investments can, however, be mitigated by managing the tenure involved. Investors who enter Mutual Funds for quick gains encounter a volatile market, more often than not.
Investors opting for the long haul, on the other hand, are able to counter this volatility over the long term. In simpler terms, any money infused in Mutual Funds, be it in a lumpsum or through SIPs, has the potential to tide over the kickbacks of equity market, provided it is allowed sufficient time to do so.
This cannot be determined based on the “one size fits all” approach as certain factors have to be considered before suggesting the right amount for investing in Mutual Funds. The word in the market is that at least 25-30% of one's monthly income should be diverted into savings.
This, however, is far from the truth. The amount to be set aside for savings can only be determined after gauging the individual’s financial profile and monetary obligations, irrespective of the asset class he may be eyeing. Of this, a certain volume of money needs to be diverted to invest in market-linked products like Mutual Funds to align the final portfolio with the investor’s financial goals.
Besides this, portions of the amount set aside for investing need to be parked in small saving schemes and bank products like FDs to diversify investments appropriately, and consequently balance the portfolio.
