Know How to Use a Return on Investment Calculator

Charlotte Miller

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Know How to Use a Return on Investment Calculator

Saving money and investing are two different things. While we definitely need to have some savings in the account for immediate availability, keeping all of your money as savings isn’t a great idea; you also need to invest. Investing money helps your money grow at a better rate than keeping the same amount of money in your savings account as the return on investment is much higher. A quick glance at this return on investment calculator will give you a bird’s eye view on how you can make your money work as hard as you do, and give you the returns you actually deserve. 

If you don’t have an idea about return on investment calculators, keep reading as we are going to briefly discuss this amazing tool that can help you plan your investments better!

What is a Return on Investment Calculator? 

A return on investment calculator is a handy online tool that helps you analyze how much returns you can expect by investing in a specific plan or financial instrument. It does so by factoring various parameters such as investment amount, the period of investment, and approximate returns you can get on that investment. However, it’s just an approximation as rates could vary across instruments; therefore, if you want to invest in ULIPs, then it’s best to check a ULIP calculator as that’s specifically designed to help you calculate the approximate return on investment for that particular instrument. 

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How does a Return on Investment Calculator Work? 

As mentioned, it factors in various parameters to give you an approximate figure. However, it’s safe to assume that a single calculator won’t likely give you results across various instruments and plans offered by different companies, as the rates vary. So, it’s best to use instrument specific return on investment calculator if you want to find out expected returns on your chosen instruments and plans. 

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Advantages of Using an online calculator 

Smart investors don’t play blind, and neither should you. An online return on investment calculator helps you determine how much returns you can expect on investing a particular amount of money. It lets you plan better by helping you choose the products that best match your investment goals. 

For e.g., a risk averse investor might want to go for instruments and plans that are considered safe with stable returns. The more enthusiastic ones may choose plans are high-risk with high-returns. So, depending on your goals, and your risk appetite, you can be well-prepared to plan investments better. 

Moreover, on investing into certain plans you can also get tax breaks under Section 80 C of the Income Tax Act

What is Section 80 C of the Income Tax Act? 

We often hear about this section but not all of us are aware about what is 80 C? So, in case you are also wondering and struggling in understanding the section 80 C, here we have explained it for you. 

Section 80 C of the Income Tax Act gives you tax breaks for investing in eligible instruments and plans like life insurance, health insurance, and other tax saving investments up to 1.5 lakhs in a financial year on your overall income for that year. 

Now that we have briefly discussed return on investment calculator, let’s have a look at a few essential points that will make good investment decisions. 

  • Check your Risk Appetite: The first and foremost point to keep in mind while investing is your risk appetite. It’s always a good idea to figure out how much money you can invest in a market-linked plan like ULIP. 
  • Figure Out Your Financial Goals: Your financial goals could greatly vary from that of your friends, and therefore, it’s important to pen down those exact goals that you want to achieve through the investments you make. This will help you choose instruments and plans that best match with the returns you expect to make. 
  • Period of Investment: The returns you make would likely vary on the period of investment. For e.g., the risk averse investor may likely want to stay invested over a longer period of time for stable returns, while an investor willing to take risk, may want to invest in plans that give higher returns in a shorter period of time. 

No matter what financial goals you may want to achieve in life, a return on investment calculator and ULIP calculator are handy tools that you should check out if you want to make the best investment decisions that are driven by logic and market trends. 

Since investments are mostly subject to market risks, it’s best to plan your investments in a way they work for you, and not against you in the longer run!