5 Benefits Of Lump Sum Investment In Mutual Funds
The financial market is sprawling with several investment options. Each one of them apparently seems to be perfect but one must never jump into conclusion without adequate research. Hoarding money in banks has become obsolete, and people are now looking for more lucrative investment options which would offer them better returns over time. Also, they are not hesitating to take a little risk for that. In recent times, mutual funds have become very famous among investors, and rightfully so. People prefer investing in mutual funds investment over standard savings schemes.
Mutual funds offer the scope of a lump sum as well as smaller and more frequent investments. Most people, under wrong notions, and start preferring small investment because they are either not well-versed with the working of the market or have been wrongly guided. In the long run, it is the investors who invest larger amounts to reap the most benefits. A mutual fund lumpsum calculator gives you the exact estimate of your investments and returns.
What Is Mutual Fund
A mutual fund is a sort of investment vehicle which is an accumulation of money collected from several investors in order to be invested in securities like money market instruments, bonds, stocks and other assets. These funds are looked after and operated by finance professionals called fund managers. They allow the fund’s assets to produce income for the investors. The investors, on the other hand, are shareholders.
Mutual funds are popular also because of their overall simplicity of investment. The investor has to engage in almost zero proceedings as a professional handle all the work. All you have to do is invest and wait for your returns. And if you wish to get on with the mathematical calculations, you can always take the aid of a mutual fund lumpsum calculator.
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Lump-sum investments are the best for large amounts. Source: fincash.com
Benefits Of Lump Sum Investment
Like previously mentioned, a lump sum amount invested gives a greater return, so we shall now delve deeper into this aspect and explore the benefits of the same.
1. A great option to set aside for a specific period
Lump sum mode of investment refers to investing a large sum of money in a mutual fund scheme. It goes down as a one-time investment. The entire amount is thus invested in one go. It is a great option if you are willing to set aside a large sum of money for investment. This lump sum investment can be made either in equity funds or fixed income depending on factors like investment objective and tenure as well as the risk appetite. The minimum investment amount depends on the scheme but sometimes it can be as less as 5,000 INR.
In case of a lump sum investment, the tenure is set approximately 10 years or more but in case an individual wants to invest in a medium-term tenure, he/she can opt for an investment in a debt fund. For calculating the returns, a lumpsum calculator can be used.
2. Large Amount Investment
As an investor invests a large amount in a lump sum scheme, his investment is subject to an increase when the market undergoes a growth period. This makes his return grow by a large margin as compared to SIPs or other small investments. A mutual fund lumpsum calculator can always guide you with the calculation. The amount of return is way larger than any bank can get you under any of its schemes.
Lump sum investments in mutual funds are thus becoming very popular and pulling a large amount of money. Where previously people opted for fixed deposits for their investment of a considerable amount, now they choose mutual funds for getting handsome returns.
3. Market Timing
When an individual invests his lump sum amount during a potential market timing, he/she has a higher chance of earning higher returns. In the case of a market slump, a lump sum return would be higher than SIP returns. One must keep in mind the market timing while investing to make the best use of the lump sum scheme.
A lump sum investment scheme in mutual funds is mostly suitable for individuals having idle money with them. Individuals having a large sum of money at their disposal can spread their investment. It is a one-time thing and unlike SIPs, investment at regular intervals is not required. One can use tools such as a lump sum calculator to easily predict the returns. One can rest assured after his/her one-time investment instead of going through the hassle every month or any stipulated intervals.
5. Bigger Returns
A lump sum investment in mutual funds provides you with a greater return. The amount depends upon a lot of factors like the total sum of your invested money, the tenure of your investment and also the market graph. A lot of factors work together to determine the yield of your investment at the end of the term period. All of that is taken care of by the financial agents. In case you are inquisitive, you may use a mutual funds lumpsum calculator to figure out an approximate number.
All the above-enumerated points make it as clear as a day that for a larger amount, no better option other than lump sum investment is available in the market. So if you are planning to have another fixed deposit, bunk that idea and rather opt for a lump sum investment in the mutual funds. Check the difference yourself in mutual funds lumpsum calculator, you would be baffled by the return.