WHEN IS THE RIGHT TIME TO INVEST A LUMPSUM IN MUTUAL FUNDS?

SIP and mutual funds are quite synonymous, right? Wrong. SIP or Systematic Investment Plan is merely a way to invest in mutual funds. Did you know there’s another means through which you can invest in mutual funds as well? You can make a lumpsum investment to invest in your desired mutual fund schemes. With dozens of articles flooding the internet with SIP investments, it might get difficult to get the correct information about lumpsum investments. One such important yet overlooked information is understanding the right time to invest a lumpsum in mutual funds. But, before we dive into that, let’s quickly recall what exactly is a lumpsum investment.

What is a lumpsum investment?

A lumpsum investment is when an investor allocates a significant sum of money in one go towards their mutual fund investments. A lump sum investment is usually ideal when an investor has surplus cash lying around, or a sudden, significant influx of funds.

lumpsum investment

This money could be funds received from sale of an asset such as a house, lottery, money received after retirement, or inheritance or anything.

When is the correct time to make a lumpsum?

Usually, lumpsum investment is not the ideal mode of investment if you wish to invest in equity and equity-related securities, as experts believe that it is better to stagger your equity investments. SIPs are more suitable for equity investments. With lumpsum investment, an investor exposes themselves to the volatilities and uncertainties of the stock market.

Investing in lumpsum might require an investor to time the markets properly. While investing in mutual funds via lumpsum mode of investment, your chief aim should be protecting your capital. Investments in debt mutual funds can help you achieve the same. What’s more, lumpsum investments are usually recommended to achieve your short-term goals. Lumpsum investment work to their maximum potential when markets trends are on a rise. If you are definite about your investment horizon, financial objectives, and risk appetite, then any time can be considered as a good time.

If you do not wish to risk your investments completely, you can consider making an STP along with lumpsum investment. STP or Systematic Transfer Plan helps you to systematically transfer your funds from one asset to another. This strategy is highly used in situations where you need to realign or relocate your investment portfolio.

If you wish to understand the future value of your mutual fund investments, you can use a mutual fund lumpsum calculator. Also known as lumpsum calculator, this device helps you to understand the estimated total corpus on withdrawing your funds*. You can also determine the lumpsum amount needed to invest to achieve a particular specific amount over a period of time. So, use this tool at your disposal to carefully plan your investments. Happy investing!

*Note that a lumpsum calculator does not offer a definitive indicative of the returns on your mutual funds. Rather it provides an estimated value.

Author: Naveen EThis is E.Naveen Kumar full time Content Writer, SEO, Digital marketing Expert, founder of financesrule.com. Really enjoying playing cricket at free times. Being a Btech Graduation from Computer Science stream Selected full-time blogging as my Profession.

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