Mutual funds’ performance is mainly dependent on market conditions. Equity funds perform when the market delivers returns while the performance of debt funds depends on the interest rates offered by the underlying instruments. As a result, investors must carefully consider the expected performance of equity or debt funds and determine if the risk-reward ratio favours them.
Ideally, a fund must demand less risk and deliver high rewards. However, that doesn’t happen. As a result, investors must strike the right balance between their risk appetite and potential returns to make gains. This article provides detailed insight into mutual funds’ risk-reward ratio and how a mutual fund calculator can help investors gauge returns.
Understanding the risk-reward dynamics
While investing in a mutual fund, you must consider your risk appetite and investment goal. You may find various mutual funds with lucrative historical returns, but they may demand a high-risk appetite. Meanwhile, debt mutual funds investing in money market instruments and government bonds provide stable returns and require less risk.
Understanding this risk-return relationship is crucial when investing your money. You can use a mutual fund calculator to compare the return of various funds and choose a suitable option based on your financial objective and risk appetite.
How does a mutual fund calculator help assess risks and rewards?
Before investing in mutual funds, you must evaluate your risk and gauge your rewards. The quickest and easiest way is to use an online mutual fund calculator that determines your returns on mutual fund investment and helps assess related risks. Here is how it helps examine your risk and rewards:
- It assists you in planning your finances for the long and short-term, depending on your investment objectives.
- You can estimate your returns depending on your investment horizon. You can get precise results for varying investment horizons.
An online mutual fund calculator assists you in determining the returns on your mutual fund investments and helps draft an effective financial plan.
Advantages of using a mutual fund calculator
In addition to the quick and convenient calculation of your mutual fund returns, a mutual fund calculator also offers the following benefits:
- It saves time and effort and prevents any error that might creep in during manual calculation.
- Since you can access an online mutual fund calculator tool, you can plan your finances while on the go, anywhere and anytime.
- The tools are designed with care and precaution and use robust techniques to calculate your returns
- Whether you wish to invest in a lump sum or through monthly SIPs, you can use the calculator to estimate returns through both types of investments.
Financial calculations can get lengthy and time-consuming, creating hassles in planning your finances. However, with a robust and integrated mutual fund calculator tool, you can conveniently assess your mutual fund returns and plan your investment according to your financial objectives.