SIP & Lump sum Returns Calculator of any Mutual Fund for NEXT 30 Years [EXCEL VIDEO]

One of the most asked questions on my YouTube Videos comments is, how to calculate mutual fund returns for upcoming 5, 10, 15, 20, 25 or even 30 years using both SIP and Lump sum investments in any Mutual Fund.

You can easily calculate Returns of any Mutual fund for next 30 years using the excel calculator I have provided in this article. Mutual Fund Returns excel calculator with SIP and Lump sum investment options will help you to understand the total amount you will be able to accumulate over a period of time.

It is important to note that you achieve best results in mutual fund investments when you invest for longer duration. SIP or Systematic Investment Planning will help you to get the benefit of Rupee-cost averaging, which means you will buy more mutual fund units when the market is down, thus giving you more profits. But, Lump sum investment is something where you will get more returns than SIP, considering you invest for a very long time.

You can find the mutual fund calculator for investment up to next 30 years in any mutual fund via SIP and Lump sum options at the bottom of this article.

Read on to get more information about how to work with Excel calculator and how mutual fund investment works

Mutual Fund Returns Calculation Example Video:

More Videos: Other Excel Calculator Videos

What are Mutual Funds:

• Mutual Funds are Funds that help you invest in shares of multiple companies
• Unlike stocks investing, mutual funds invests your money in multiple companies thus reducing the risks
• This benefit of mutual funds investing in shares of multiple companies is called Diversification
• Every mutual fund is assigned a Fund Manager who manages that mutual fund
• Fund manager is responsible to select percentage of stocks to invest your money in, to give you better returns
• Unlike stocks investing, you need not have to worry about selecting and monitoring stock performances while investing in mutual funds. Fund manager does the job for you
• Below is the screenshot of the portfolio (list of stocks) of one the popular mutual funds in India

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What is NAV of Mutual Fund:

• NAV (or Net Asset Value) is the price of single unit of mutual fund
• NAV of every mutual fund is updated on daily basis except on weekends and public holidays in India
• For example, NAV = Rs. 100, and you invest Rs. 10,000 then you get 100 units (Rs. 10,000 / Rs. 100) of this mutual fund in your folio (mutual fund account)
• In this way, your investment value divided by the NAV value will determine the units that will be allocated to you
• NAV of a mutual fund is something you should NOT consider while choosing a mutual fund. It doesn't matter if NAV is Rs. 10 or Rs. 1000
  List of stocks present in mutual fund will determine the fund's future growth
• If the companies in fund's portfolio grows with positive returns, NAV increases with time, else NAV decreases with time. Ideally, the NAV fluctuates over time and over longer run (over 5-7 years), mutual funds are believed to give good returns

Also Read: PPF Interest Calculator for next 30 Years [EXCEL VIDEO]

What is Expense Ratio:

Expense ratio is a small percentage taken by AMC (Asset Management Company) to manage your funds. You need not have to pay additionally as a part of Expense Ratio.

Expense Ratio amount is recovered from your profits that you make. Usually, expense ratio of regular mutual funds are high compared to those of direct mutual funds. You can get details of expense ratio of every fund on the mutual fund page.

How to Invest in Mutual Funds:

There are 2 ways you can invest in Mutual Funds.

1. SIP - Systematic Investment Plan:
   SIP allows you to invest a predefined amount every month in a mutual fund. Based on the NAV of mutual fund, Units are allotted to your account. You sell off these units when you want to redeem these units in order to book profits in mutual fund
   
   
2. Lump sum Investment:
   In this, you invest a lump sum amount just once. You are allotted number of units based on your Investment amount and the NAV value on the day of Investment. As the NAV of mutual fund grows with time, your investment value also increases. You can redeem your mutual fund units on latest NAV when you want to book profits.

Also Read: Home Loan EMI Calculation & Prepayments - Reduce EMI or Tenure [EXCEL VIDEO]

What is SIP and How SIP works:

• SIP full form is Systematic Investment Plan. This means you systematically invest specific amount in a disciplined manner every month based on your goals
• The SIP amount you invest is used to buy Mutual Funds units every month
• NAV (Net Asset Value) is the price of the single unit of a mutual fund
• Units Calculation formula is - Units = Investment Amount / NAV
• If NAV = Rs. 100 (price of single unit of a mutual fund), and you invest Rs. 5000, you get 50 Units (Rs. 5000 / Rs. 100) of this mutual fund for this investment
• This way you invest every month and every SIP is considered as fresh Investment. Based on the NAV of the mutual fund, specific number of units gets added to your account

SIP vs Lump sum Investment:

As mentioned above, SIP is investing in a systematic manner every month, on the other hand Lump sum investing is investing your entire amount in one go instead of investing systematically every month

• Let's say you have Rs. 1,20,000 to be invested in a mutual fund
• In SIP, you will divide this amount to be invested over a year so your SIP amount every month will be Rs. 10,000, of Rs. 5000 to be invested over the period of 2 years
• In Lump sum investing, you will invest entire Rs. 1,20,000 in one go, without dividing it into multiple months investment
• The calculation of number of units allocated to you remains same as mentioned above
• But while investing in lump sum, there might be a risk you are taking since you cannot predict market. If market crashes next month after your lump sum investing, your investment value might be negative
• But you might also be rewarded if market goes up after you investment since more units are allocated to you at reduced NAV value of mutual fund

How to Calculate Income Tax FY 2021-22:

SIP Benefits & Advantages:

• Allows you to invest only a fraction of amount instead of entire corpus in one go. You can choose this fraction of amount as SIP based on your affordability
• Rupee Cost Averaging. You buy more units when market goes down, since NAV is less (more on this below). This increases your returns when market comes back to normal
• You can have multiple SIPs based on your goals whether they are short term, medium term or long term goals
• SIPs are flexible these days. You can choose to pause a SIP for few weeks or months, or stop SIP if your goal is achieved before time
• You become disciplined in working towards goals with given timelines

Also Read: How to Calculate Income Tax on Salary [EXCEL VIDEO]

SIP Excel Calculator:

You can easily calculate SIP returns using excel document (link at the bottom of post).

This excel will help you know your future SIP returns with just 2 inputs - SIP Amount & Expected Returns
Here are the screenshots of some SIP returns:

SIP Amount = Rs. 5000, Expected Returns = 10%

SIP Amount = Rs. 5000, Expected Returns = 12%

SIP Amount = Rs. 10000, Expected Returns = 10%

SIP Amount = Rs. 10000, Expected Returns = 12%

Types of Mutual Funds:

• There are 3 types of mutual funds: Equity, Debt and Hybrid mutual funds
• Equity mutual fund: Mutual funds that invest in equities - shares of companies. These mutual funds high risk but also gives you high returns
• Debt mutual fund: Mutual funds that invest in bonds or instruments. They have low risk and low returns
• Hybrid mutual fund: Mutual funds that invest in a combination of Equity and Debt instruments. They have medium risk and medium returns
• Based on your risk appetite and your goals, you can choose between above categories of mutual funds

SIP in Mutual Fund to Save Income Tax:

• You can invest in one type of mutual fund called ELSS (Equity Linked Saving Scheme) that helps is saving Income Tax under Section 80C
• Maximum deduction allowed under Section 80C is Rs. 1.5 Lacs (as of FY 2021-22)
• ELSS has a lock-in period of 3 years
• You can invest via SIP in ELSS to achieve your goals and save income tax at the same time

Here is the Video to help you Save Income Tax in some ways:

Mutual Fund Withdrawal:

• After your SIP investments are complete and you no longer need or want to invest via SIP, you can either choose to stop SIP and redeem (withdraw) all your Units or keep them invested to grow more
• When you redeem the units, it depends whether to sell all the units or partially you can select the number of units to be sold
• Latest NAV of mutual fund will be considered while you sell mutual fund units which we saw in the video at the start of this post
• Total Investment Value = Total Number of Units * Current NAV

Mutual Fund - Things to Remember before investing:

• While you are searching for a good mutual fund, you should see how the fund has performed in past
• You should also see the expense ratio of the fund and how much money is invested in the fund which is called AUM (Asset under management). Lower the expense ratio of the fund, more returns you'll receive
• You should only invest in Direct mutual funds for better returns which also have low expense ratio compared to their regular fund counterpart
• Remember to link your mutual funds investments with goals. And once your goal is achieved, you can stop investing and reap the benefits
• Never book losses in mutual funds. If the market is down, wait for the market to come up so that you are in profit
• It is always better to divide your money and invest via SIP (Systematic Investment Planning) compared to investing as lump sum.
  Never try to time the market to get best returns.
• If someone says they can maximize your returns and ask you to lend them your money, just run away and never look back

Some more Videos:

DOWNLOAD MUTUAL FUND RETURNS CALCULATOR

Frequently Asked Questions (FAQs):

Q. What is the Full Form of SIP?

Ans. SIP full form if Systematic Investment Plan. Usually SIP is a specific amount you invest every month to achieve specific goals with specific tenure (time period)

Q. How SIP works?

Ans. SIP is the specific amount you invest every month for a specific goal with a specific period of time. You invest an amount of let's say Rs. 5000 every month for 5 years and with expected returns of 10% per year. In this case, after 5 years your expected investment value would be Rs. 3,90,411 according to the SIP returns excel calculator provided above. This makes you a profit of Rs. 90,411 in 5 years and also helps you achieve your goal.

Q. What is lump sum investing?

Ans. Lump sum investing means you invest entire amount in one go. Let's say you have Rs. 1,20,000 to be invested for a year. In SIP, you divide this Rs. 1,20,000 for 12 months (1 year) and invest Rs. 10,000 every year in a mutual fund. On other hand, in lump sum investing, you invest entire amount of Rs. 1,20,000 in first month in one go. This is called lump sum investing.

Q. What is better SIP or Lump sum investing?

Ans. Combination of both SIP and Lump sum is better. You can continue with your SIP during normal days and invest lump sum amount if available when market goes down. This way you get more units when market is down and make more profits during market crash.

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