Benefits of Lumpsum Investments in Mutual Funds

There are tons of articles on the internet providing information on how to invest in mutual funds online via SIP mode, however, not much is said about lumpsum investments. This article will focus on the benefits of investing in mutual funds via lumpsum mode. Following are some of the benefits:

  1. Investing your large corpus
    By choosing to invest in mutual funds via lumpsum mode, you can put your substantial amount in your desired mutual fund schemes at once. As a result, when the market shows a peak period, then the investment also increases in value to a large extent as compared to the value of an SIP investment.

  2. Ideal for long-term tenure
    Lumpsum mode of investment is ideal for investors who prefer to invest for a longer tenure. If you invest via lumpsum for a long duration, say 10 years or more, then parking your finances in mutual fund investments would not bring any harm and fetch substantial returns. Individuals choosing to invest for medium-term tenure can put your lumpsum in debt mutual funds.

  3. Ease of investing
    Lumpsum mode of investment is quite convenient for those individuals who are quite forgetful and fail to plan things in a systematic manner. Do you often forget to pay your bills till you receive a reminder and often hit the snooze button when reminded? Then, lumpsum investments have got your back.

  4. Timing the market
    Investors should consider investing in mutual funds via lumpsum when the market is a slump and it shows growth potential. This is the perfect opportunity to earn higher returns in the long run. However, if the investments are made when the markets are at its peak, you might end up losing your money. 

Before you decide to go all-in with lumpsum investments, here are a few things you should keep in mind:

  1. Define your objective – Always invest with a financial objective in mind, be it planning a wedding, retirement, child education, or taking an overseas trip. This will improve the dedication. It will also put your mind at ease and help you hold your investments during volatile times.

  2. Duration – All types of mutual funds have a holding tenure associated with them. If you fail to invest according to the benchmark time, you might lose your money. Hence, you should be aware of the market’s highs and lows to gain substantial returns in the long run.

  3. Power of compounding – If you are a young investor with huge corpus, it is recommended to invest at the earliest. This is because it will ensure that you stay invested for a longer tenure. Your investments will also have better potential to grow. With your returns working to generate additional returns on them, the power of compounding will work its magic.

  4. Market fluctuations – Even the best and the most ideal mutual fund investment is not devoid of risks. Just like life, it is part and parcel of investing. Mutual funds are subject to market risks. On the other hand, investing in bank FDs have inflationary risks. 

Always consider your risk profile, investment objectives and tenure before choosing the perfect mode of investment for you. Just like SIP calculator, individuals can use a lumpsum calculator to get an estimate on the future value of their investments. Happy investing!