1. What is a Mutual Fund Calculator (SIP/Lump Sum)?

Definition: This calculator estimates the future value of a mutual fund investment, whether made as a lump sum or through systematic investment plans (SIPs).

Purpose: It helps investors project potential returns on their mutual fund investments based on compound growth.

2. How Does the Calculator Work?

The calculator uses the compound interest formula:

Where:

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

Explanation: The formula calculates how a single lump sum investment grows over time with compound returns.

3. Importance of Mutual Fund Projections

Details: Understanding potential returns helps with financial planning, goal setting, and comparing different investment options.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between SIP and lump sum?
A: Lump sum is a one-time investment while SIP (Systematic Investment Plan) involves regular periodic investments.

Q2: What's a realistic rate of return?
A: Historically, stock mutual funds average 7-10% annually, but past performance doesn't guarantee future results.

Q3: How does compounding work?
A: Earnings generate their own earnings over time - "interest on interest" effect.

Q4: Should I adjust for inflation?
A: For real returns, subtract inflation (typically 2-3%) from your rate of return.

Q5: How do taxes affect returns?
A: Taxes on dividends and capital gains reduce net returns; consider tax-advantaged accounts.