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# Mutual Fund Calculator

## What is a Mutual Fund?

A mutual fund is a professionally managed investment product that pools money from numerous investors to invest in a diversified portfolio of assets as outlined in the fund's terms of agreements. These portfolios may include a wide variety of securities, such as stocks, bonds, money market instruments among other assets.

Each investor in a mutual fund partially owns the entire portfolio in a manner that's similar to stock investment. This ownership is represented through shares, and the total value of the assets within the fund gives us a crucial figure for mutual funds - its Net Asset Value (NAV).

The NAV, much like a stock price, signifies the cost of a single share of the mutual fund. This value changes every time the fund is evaluated based on the frequency stated in the fund's policy, and an unlimited number of shares can exist in a mutual fund. Each time an investment is made into the fund, new shares are issued, and shares are withdrawn once an investment is pulled out.

You can compare the NAV from the start of the investment with the NAV from the end, and calculate your mutual fund return. The volatility of the NAV will depend on the risk of the portfolio, like most other investments. There are different mutual fund types, which are classified based on the different securities they invest in.

## How to use a Mutual Fund Calculator

A mutual fund calculator is a handy tool that helps you calculate the returns on your mutual fund investment based on the data you provide. The following steps will guide you on how to use the calculator:

1. Decide on your investment type: A Systematic Investment Plan (SIP) which includes a consistent, monthly contribution to the fund, or a lump-sum, one-time investment. Select one of these options.

2. Based on the choice made in step 1, input the value of your monthly contribution or one-time investment.

3. Input your expected return from the mutual fund on the next line.

4. Provide your intended investment period - that is the length of time your money would be active within the fund.

5. You've now calculated your mutual fund return! The final line value is the total amount you'll get from your investment; the sum of your initial contribution and the expected profit from the mutual fund.

## An Actual Example to Demonstrate the Calculator

For example, you have selected a mutual fund as an investment avenue. You plan to follow this route with a lump-sum, one-time investment of \$10,000. Your expected return from the mutual fund is 7% annually, and you decide that your investment period would be for 10 years.

Entering these values into the calculator, here is what you should get:

• Investment Type: Lump-sum

• One-time investment: \$10,000

• Annual Return Rate: 7%

• Investment Period: 10 years

The final line value, given the above inputs in the calculator, will show the total amount you can expect after 10 years. This includes the initial \$10,000 plus the accumulated interest over the ten-year period.

The financial tool, such as a mutual fund calculator, helps simplify the process by factoring all essential variables that can affect your returns. This allows you to have a clear understanding of how different elements can influence your investment and help you make an informed decision.

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