Mutual Fund Calculator (SIP)

What are Mutual Funds?

A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional fund managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

How Mutual Funds Work

When you invest in a mutual fund, you buy units, which represent your share of ownership in the fund's portfolio. The price of each unit is called the Net Asset Value (NAV), calculated daily based on the total market value of all the securities held by the fund, minus liabilities, divided by the total number of units outstanding. Investments can often be made as a lump sum or through a Systematic Investment Plan (SIP).

Types of Mutual Funds

Mutual funds can be broadly categorized based on asset class (Equity, Debt, Hybrid), structure (Open-ended, Close-ended), or investment objective (Growth, Income, Tax-saving - ELSS).

Pros of Mutual Funds

• Professional Management: Funds are managed by experienced professionals who research and select investments.
• Diversification: Investing in a mutual fund provides instant diversification across various stocks or bonds, reducing concentration risk compared to buying individual securities.
• Affordability & Accessibility: You can often start investing with small amounts, including via SIPs, making them accessible to most investors.
• Liquidity: Open-ended funds allow investors to redeem their units on any business day at the prevailing NAV.
• Regulation: Mutual funds in India are regulated by SEBI, providing a framework for investor protection.

Cons of Mutual Funds

• Market Risk: The value of mutual fund units fluctuates with market movements. Equity funds carry higher risk than debt funds.
• Costs & Fees: Funds charge an annual fee called the Expense Ratio to cover management and operational costs. Some funds may also have entry or exit loads.
• No Guaranteed Returns: Unlike fixed deposits, mutual funds do not offer guaranteed returns (except for certain specific types of debt funds held to maturity, which is less common).
• Over-Diversification: Sometimes, holding too many funds or funds with overlapping portfolios can dilute potential returns.

Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. This calculator provides estimates based on SIP investments and does not guarantee future results. Past performance is not indicative of future returns. Consult with a financial advisor before making investment decisions.