What is Lumpsum Investment?
A lump sum investment means investing a large amount of money at one time in a mutual fund. It is suitable when you have a significant sum ready to invest, like from savings, bonuses, or an inheritance.
Benefit of Lumpsum Investment in Mutual Funds
1
Power of Compounding
With lump sum, your full investment starts earning returns immediately. The longer you stay invested, the more you benefit from compounding, where your returns start earning returns over time.
2
Market Timing
If invested at the right time, lump sum can give higher returns when markets rise. It benefits from the entire market growth journey.
3
Ease and Simplicity
Unlike a Systematic Investment Plan (SIP) that requires regular investments, a lump sum investment is one-time, making it convenient if you don’t want to track your investments frequently.
Who Can Invest in Lumpsum?
- Investors with Surplus Funds: Those who have a large amount of money lying idle can consider a lump sum investment to generate better returns over time.
- Long-Term Investors: Lumpsum investment is suitable if you have a long-term horizon, like 5 to 10 years, allowing your investment to grow despite market fluctuations.
- Investors with Market Understanding: If you can handle short-term market volatility, lump sum investing may work for you. Otherwise, SIPs might be more suitable.
If you have a large amount in fixed deposits (FDs) with low returns, consider withdrawing 40% of your FD savings and investing in equity. This way, you could earn better returns over the long term.
In summary, lump sum investments work well for disciplined investors who are ready for the market’s ups and downs and can stay invested for the long term.
Mutual Funds
Lumpsum
SIP
SWP
STP
