Investing in mutual funds has become a popular choice for those looking to grow their wealth over time. With the right investment strategy and tools like a mutual fund calculator, it is possible to see significant returns. For instance, it is feasible to turn an investment of Rs 10,000 per month into approximately 46 lakh over 11 years with consistent contributions and a favourable rate of return. This article will guide you through how a mutual fund calculator, like the Bajaj Finserv mutual fund calculator can help you plan your investments and explore the role of a Systematic Withdrawal Plan (SWP) in maximising returns.
What is a mutual fund calculator and how does it help?
A mutual fund calculator is an online tool that allows investors to estimate the potential returns from their investments. By inputting variables such as the monthly investment amount, expected rate of return, and investment tenure, you can see how your money will grow over time. This helps in planning for long-term goals such as buying a house, funding a child’s education, or building a retirement corpus.
How to use a mutual fund calculator effectively
To achieve a significant return, like making 46 lakh with a monthly investment of Rs 10,000 over 11 years, it is crucial to understand how to use a mutual fund calculator effectively:
1. Set the monthly investment amount: Input Rs 10,000 as your monthly contribution.
2. Choose the investment tenure: Set the duration as 11 years.
3. Estimate the expected rate of return: Mutual funds, particularly equity-based ones, can offer an annual return between 10-15% on average. For this example, a 12% annual return is a reasonable assumption.
The mutual fund calculator will then compute the total corpus you can expect by the end of the investment period. This includes both your contributions and the compounded returns, illustrating the power of systematic investing.
The power of compounding in mutual fund investments
The primary reason such substantial growth is achievable with regular investments lies in the concept of compounding. When you invest Rs 10,000 each month and earn returns, those returns are reinvested, generating more earnings over time. The longer your investment period, the greater the impact of compounding, which helps in accumulating significant wealth.
How an SWP works
1. Customisable withdrawal schedule: A Systematic Withdrawal Plan
allows you to decide the frequency and amount of withdrawals, whether monthly, quarterly, or annually.
2. Tax efficiency: In many cases, SWP withdrawals are more tax-efficient than traditional fixed-income instruments, as they may incur capital gains tax rather than income tax.
3. Flexibility and control: You maintain control over your investments and can modify or stop the plan as needed.
For investors who have accumulated a large sum through mutual funds, an SWP can be an effective way to receive regular income without depleting the corpus too quickly.
Strategies to maximise returns with mutual fund investments
To achieve significant returns such as making 46 lakh from Rs 10,000 monthly investments over 11 years, follow these key strategies:
1. Select the right mutual funds: Equity mutual funds often provide higher returns compared to debt funds, though they come with higher risk. Diversifying your portfolio can help mitigate risk while aiming for higher returns.
2. Start early: The earlier you start investing, the more time your investments have to benefit from compounding.
3. Stay invested for the long term: Market fluctuations are common, but staying invested helps in riding out the lows and capitalising on market recoveries.
4. Review and rebalance: Periodically reviewing your mutual fund portfolio and making adjustments as needed can optimise your investment strategy.
Using the mutual fund calculator to set financial goals
A mutual fund calculator can play a critical role in helping you set and adjust financial goals. By experimenting with different investment amounts, rates of return, and tenures, you can understand how much you need to invest to reach a target like 46 lakh in 11 years. For example, you can modify the expected rate of return to see how market variations may affect your final amount.
Example calculation for Rs 10,000 per month
Suppose you invest Rs 10,000 each month for 11 years at an expected annual return rate of 12%. The mutual fund calculator will show that you could potentially accumulate around 46 lakh by the end of the investment period. This outcome is possible due to the compound interest effect and consistent contributions.
Benefits of a Systematic Withdrawal Plan
Once you reach your investment goal, a Systematic Withdrawal Plan can help you enjoy the returns without withdrawing the entire amount at once. The benefits of using an SWP include:
● Consistent cash flow: You receive a steady income, ideal for managing expenses during retirement or funding long-term plans.
● Continued growth: The remaining investment continues to grow, potentially adding more value over time.
● Control over withdrawals: You decide how much and how often to withdraw, giving you flexibility in managing your funds.
Conclusion: Achieving your financial goals with mutual fund calculators
With disciplined investments and the power of compounding, it is possible to turn a modest Rs 10,000 monthly investment into 46 lakh over 11 years. Using the Bajaj Finserv mutual fund calculator can guide you in understanding how to achieve such ambitious financial goals by illustrating potential growth scenarios. Once your goal is reached, a Systematic Withdrawal Plan can be used to manage withdrawals while keeping your investment portfolio working for you. By applying these strategies and tools, you can build and maintain a robust financial plan tailored to your aspirations.
Disclaimer: Investments in the securities market are subject to market risks. Read all scheme related documents carefully before investing. Registration granted by AMFI, and certification from NISM in no way guarantees performance of the intermediary or provides any assurance of returns to investors. Registered Office: Bajaj Finance Limited Complex, Mumbai – Pune Road, Akurdi, Pune 411035.
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