Whenever you decide to invest in mutual funds, you need first to identify your investing pattern and prepare appropriately. Two ways of investing in mutual funds are through SIP or lump-sum.
While both are different, there are significant differences that one needs to understand before deciding the manner. While SIP puts the money in an auto-pilot mode, lumpsum investment requires you to sit on the steering wheel.
In this article, we will help you see through what you need to know while making the choice of lumpsum mutual fund investment.
What is Lumpsum Investment?
When you make a lumpsum mutual fund investment, you are committing a single, large quantity of money to a single mutual fund. Lump-sum mutual fund investments are often favoured by significant investors and players who rely heavily on firm stock appreciation for wealth building.
A lumpsum investment in a mutual fund might be a smart option for an individual with a sizable investment quantity and a strong risk tolerance.
You can utilize our lumpsum calculator to understand our lumpsum investment details.
Lumpsum Investment Features
Mutual funds can be an excellent investment option for those who want to build wealth through equity investments. They provide a number of benefits that are not available in other types of investments and thus, if you are looking forward to diversifying your portfolio, mutual funds should be considered.
While mutual funds provide an array of benefits, you need to keep some things in mind before investing in them, especially via the lumpsum route.
The features of lumpsum mutual fund investments are as follows.
Lower Investment Amount
Lump-sum mutual funds are a really good idea in these times when markets are down and it’s difficult to find reliable stocks to invest in.
Most people feel more comfortable with investing a large amount in a single investment rather than smaller amounts in many investments. In such a scenario, lumpsum mutual funds make great sense because the minimum investment is just 5,000 INR for most mutual funds.
Mutual funds are long-term investments. A lumpsum MF investment can be held for a prolonged period of time. Professionals recommend a period of 3 years at least. If you want to invest for short-term growth, try placing it in a liquid or debt fund.
The volatility of the Market
The market is rising and it seems like an ideal time to buy. As investors, we purchase lumpsum mutual fund units when markets are high, and get worried when they fall. If you invest a large amount of money in one place, your investments could dip if the markets do the same.
However, the key is to hold on to the investment over an extended period. The reason to stay invested in lumpsum mutual funds is to make the most of compounding interest.
When Lumpsum Mutual Fund Investing Makes Sense?
Conventional wisdom holds that the best time to invest is when there is a market crash. Recognising a market bottom and putting a lumpsum payment in mutual funds at the proper moment might result in large returns due to the standard investing idea of buying cheap and selling expensive.
‘Lumpsum’ investments can be extremely beneficial in building a portfolio. The success of a lumpsum investment depends on the kind of asset you invest in and your strategic planning. A wrong-timed investment might result in great losses as well as a loss of morale.
This is because when an investor who invested a lumpsum amount is losing money, he/she may be hesitant to put more funds in. This is precisely why lumpsum mutual fund investing is said to reward experienced investors with extensive market expertise. Other advantages of lumpsum investing include.
- It can provide significant rewards for investors with a lengthy investing plan.
- It can aid in the achievement of certain financial objectives, such as investing in a kid’s education or retirement funds.
- It takes a one-time payment, which is beneficial to many people.
Want to know your lumpsum investment details? We’ve got the perfect lumpsum calculator for you. It’s free, easy to use, and just a few clicks away. Thanks to this lumpsum calculator, you can easily get a quick estimate of how your investments would grow over time.
Mutual Funds are a great investment choice and they have a number of advantages. But one issue that new investors often find difficult to understand is whether to choose a SIP or a lumpsum investment plan. As we mentioned earlier, there are pros and cons to each type of investment.
For most situations, it seems like SIP is the recommended option. However, it still comes down to what makes sense for the investor and his or her situation. The key is to learn all you can so that you can wisely invest your money in mutual funds.
However, if you are investing in Mutual Funds, it is recommended to check out our online SIP or Lumpsum return calculator. A lumpsum calculator will help you understand what you can expect from your investment going forward.