What are Mutual funds lumpsum investment
A Lumpsum Investment Plan is a mode of investment which allows you to invest an larger amount of money in any mutual fund scheme at one time instead of staggering it over several small investments commonly referred to as a SIP (Systematic Investment Plan).
Lumpsum investments are common amongst big ticket investors who prefer to either park their money for a short duration or as a part of a long term wealth creation strategy.
Lumpsum investments tend to take better advantage of the power of compounding principle and assigns a level of perceived control an SIP investor may not have. Since a lumpsum investment is initiated from the investor end as opposed to the automated nature of an SIP, it helps in optimal usage of an investment amount based on user research and taking market volatility into account.
How to use the lumpsum Calculator and the reverse lumpsum calculator
A lumpsum calculator is an automated tool that does all your investment math for you.
This lumpsum Calculator helps you compute how much returns you would have made if you would have invested an amount of money for a particular period at a particular annual rate of return.
Instead of painstakingly doing all the calculations manually, all that you have to do with a SIP calculator is enter the amount you would have been able to invest back then, the period for which you would have wanted to invest, and it instantaneously gives you the returns you would have made during that period.
Not only does it instantaneously tell you the gains you’d have generated, but it also allows you to modify any of the variables to effortless see how they impact your overall returns. As a result, you’re able to quickly compare returns between lumpsum and other investment options as well - such as an FD.
The reverse lumpsum calculator offers the same function in a different way. In this instance, you need to enter the target amount, duration and the expected annual return and the calculator tells you how much lumpsum amount you would need to invest
Benefits of investing in Lumpsum mutual fund plans
- More convenient than a SIP Mode of Investment : For those operating on low bank balances or high quantum of SIPs, the process can often require constant diligence and efforts to ensure the deposits happen as per plans. In a lump sum investment, it’s significantly simpler and convenient since you, as an investor, can reap the constantly accruing benefits without having to worry all the time about the investment.
- Better control over the investment instruments by the investors:It can be argued that lumpsum investments offer better perceived control to the investors. Investors can make a free choice on not only the amount of the investment but also on the schemes and the time period for which they want to invest.
- Lump sum investing takes better advantage of the power of compounding:SIP investments work on the concept of rupee cost averaging and the power of compounding. On a closer look however, we see that a lump sum investment leverages the power of compounding in a superior way. When the principal amount is higher, all other factors being equal, the result of the generated return will be higher. In the case of SIP, since the principal amount can be as low as Rs. 500 per month, the consequent return on the investment is therefore significantly less. As opposed to this, when a sizeable amount is invested as a lump sum and for a longer period of time, the return on this investment is much higher. Here are the best mutual funds lumpsum plans to invest.
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