1. What is a Lump Sum Calculator Groww?

Definition: This calculator estimates the future value of a lump sum investment based on compound interest.

Purpose: It helps investors understand how their one-time investment might grow over time with compound returns.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( FV \) — Future value of investment ($)
• \( P \) — Principal lump sum amount ($)
• \( r \) — Annual interest rate (in decimal form)
• \( n \) — Number of years invested

Explanation: The formula calculates compound interest, where interest earned each year is added to the principal for future growth.

3. Importance of Lump Sum Calculation

Details: Understanding potential growth helps with financial planning, retirement savings, and investment decision making.

4. Using the Calculator

Tips: Enter the principal amount, annual rate (default 0.07 for 7%), and investment period in years (default 10). All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest calculates only on the principal, while compound interest includes previously earned interest.

Q2: What's a typical rate of return?
A: Stock market averages about 7% annually after inflation, but this varies by investment type and market conditions.

Q3: How does investment time affect results?
A: Longer periods dramatically increase results due to compounding - money grows exponentially over time.

Q4: Should I enter the rate as percentage or decimal?
A: Enter as decimal (e.g., 0.07 for 7%). The calculator will handle the conversion.

Q5: Does this account for taxes or fees?
A: No, this shows gross returns. For net returns, reduce the rate to account for taxes and investment fees.