Several investors have the misconception that SIP and mutual funds are quite synonymous in nature. However, one must understand that though SIP or Systematic Investment Plan is a popular investment tool to invest in mutual funds, there are other ways to invest in mutual funds as well. You can invest in mutual funds by making a lumpsum investment as well. However, several investors shy from making a lumpsum investment in mutual funds as they are unsure about the right time to enter the markets. Questions like is it the right to make a lumpsum investment in mutual funds, can I invest a lumpsum in mutual funds now, etc. often crop in the minds of investors. In this article, we will aim to answer this question for you. But first, let’s quickly recall what lumpsum investments are.
What is a lumpsum investment?
Lumpsum investment is a mode of investment where in an investor invests the entire investment amount in one go. Usually, an investor invests a substantial sum of money when making a lumpsum investment as unlike SIP investments an investor cannot invest more than once. If they wish to invest more in the future, they will have to make a new investment. Hence, this mode of investment is ideal for investors who have a surplus sum of money lying around or have a sudden influx of cash in their bank accounts. This money could be a result of various sources such as bonus received from employer, inheritance, funds received during retirement, winning a lottery, court settlements, sale of property or any other investment, etc.
Should an investor invest a lumpsum in mutual funds now?
Lumpsum mode of investment could be an ideal mode of investment to achieve one’s short-term objectives. This is why experts often recommend investors to make a lumpsum investment in debt funds. Lumpsum mode of investments are believed to provide supreme potential when the NAV of fund or net asset value of the mutual funds or the market are at their all-time low and there is high potential for the markets to grow in the near future. However, an investor must take caution that when they decide to invest in mutual funds through lumpsum mode of investment, they are exposed to certain volatilities and uncertainties associated with the investments in the markets. Experts further caution investors to be careful about the time they enter the markets. This is because if an investor enters the markets at the wrong time, they might end up catching the markets at its peak which might turn disastrous for their investment portfolio. Therefore it is advised that one must advise in mutual funds through lumpsum mode of investment only after thorough research and analysis of the market trends. If you wish to understand the future value of your mutual fund investments, you can use a lumpsum calculator for the same. Lumpsum mutual fund calculators are often offered by most fund houses or AMCs (asset management company). Happy investing!
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.
