When it comes to financial independence, we can name a thousand perks. You get to live how you want and spend on things you love. But with multiple perks comes multiple challenges. One such challenge is smoothly managing your expenses – both in the present and the future. And if you have a family that depends on you financially, managing expenses can become more challenging on a single paycheque.
That’s why having a sizeable savings fund is of utmost importance. And to create a savings fund, investment is crucial. In fact, investments are an essential part of financial planning. They grow your wealth and serve as a toolkit for managing financial challenges.
However, starting or resuming your investment journey can be confusing. You might want to determine how much you will be earning back in the future to channel your investment fruitfully. But how would you know that? How can you prematurely estimate your returns when you cannot see the future?
The answer is simple – an investment calculator.
What do You Need to Know About an Investment Calculator?
An investment calculator is a digital tool that estimates the returns you will earn on a particular investment.
Before we go deeper into the basics and functions of an investment calculator, there is one thing you should keep in mind. The figure generated by an investment calculator is not definite. It means the estimated returns are not guaranteed – primarily if you invest in market instruments.
Investment plans, such as mutual funds, mutual fund SIP, ELSS, and the stock market, do not guarantee returns as the market is highly volatile. The returns depend entirely on the market condition and the performance of the units.
It is important to note that an investment calculator estimates the returns based on the expected return rate you enter into the calculator. It does not analyse the market trends or fund performance for you. In reality, it is the amount you may or may not get.
However, if you use an investment calculator for fixed-income plans that offer guaranteed interest rates, the investment calculator can provide you with a highly precise return figure.
Working and Benefits of an Investment Calculator
We have already discussed what an investment calculator does – it estimates the investment returns you get. Even though it is the primary function of an investment calculator, the tool can help you considerably in doing the following.
1. Know Which Investment Plans Might Produce the Expected Returns
Suppose you are a newbie investor planning to invest in recurring deposits. As a recurring deposit earns you a fixed interest, you would want to know how much you will get after investing in it for ten years. You can do so with the help of an investment calculator, to be specific, a recurring deposit calculator.
A recurring deposit calculator calculates the accurate returns you will earn if you invest in the recurring deposit scheme. You can decide whether this plan should benefit you with this estimated figure.
2. Create a Diversified Investment Portfolio:
As said, don’t put all your eggs in one basket. Likewise, you should not invest in a single investment plan. It would be best to diversify your investment to maximise returns and maintain investment safety. You can do this by using an investment calculator. It helps to select a myriad of investment plans based on the returns they produce in the future.
Returns matter; however, you must also keep other factors in check, such as your risk appetite, customisation, withdrawal facilities, lock-in periods, etc., before selecting the investment plans.
3. Decide the Variables
Once you decide on the investment plans to proceed with, the next step is to decide on investment variables such as investment amount, investment tenure and rate of expected returns. It is a no-brainer that you need to consider your investment goals and preferences to produce a number.
Still, with an investment calculator, you can determine the profitability of these variables – whether or not they can generate enough returns to meet your financial goals and expectations. Feel free to experiment as many times as you want and put in figures until you decide.
The Bottom Line
By far, we have established that an investment calculator is a reliable tool for calculating estimated returns on your investment. It can help in your financial planning and prepare you for the future.
So, what are you waiting for? Use this free-to-use tool to begin or resume your investment journey.