Lump Sum Investments: A Guide to Boosting Your Wealth with Extra Earnings
Whether you run a business or work as a full-time employee in a corporate job, you must always witness a seasonal bounty in your earnings. Such seasonal earnings can become a big part of your wealth creation by taking a step ahead of your regular SIP investments. You can invest these extra earnings in the form of a lump-sum investment.
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Lump sum investment involves putting a substantial amount of money into mutual funds at once. However, it’s important to pay attention to market conditions whenever you make a lump sum investment. Some mutual funds are particularly well suited for this strategy.
Selecting the right mutual fund for a lump sum investment can help diversify your portfolio and generate long-term returns. But with so many mutual funds available, how do you choose the best one for your needs?
In this blog, we will delve into some of the top mutual funds for lump sum investments and the essential factors to consider when selecting a mutual fund.
There are about 2500+ mutual funds to choose from. Most of these mutual funds are divided based on market cap, style of investing, and sectors and invest in multiple segments like equity, debt, money markets, gold etc. Here are a few important points you must consider before you invest in a particular fund:
1. Fund Performance: Examine the past performance of the mutual fund and compare it with benchmark indices. While past performance is not a guarantee of future results, it provides valuable insights into how the fund has fared in different market conditions.
2. Market Timing: It is impossible to time the market. However, try to avoid making a lump sum return in an upward-trending market. It shows that the market could be overvalued. Invest at a time, when the market trends are sideways.
3. Expense Ratio: It is the fees charged by fund houses for managing the funds and covering operational expenses. A higher expense ratio can erode your long-term returns.
4. Exit Load: Some funds charge a fee when you redeem your investment within a certain period. Make a note of the exit load if you intend to invest in the market for a short period.
5. Financial Goals: Align your goals with a lump-sum investment. If you’re investing for a down payment on a car, ensure that the expected returns will help you achieve this objective. A lump sum calculator can help you estimate the future value of your investment.
Top 10 best-performing Equity Mutual Funds
The below data represents some of the best-performing Equity funds in the Large Cap, Midcap, Flexi Cap and Multi Cap segments.
Scheme Name | Launch Date | Invested Amount | Current Value | Annualised Return (%) |
|---|---|---|---|---|
Quant MidCap Gr | 26-02-2001 | 10,000 | 44,406 | 34.69 |
Quant Active Fund Gr | 21-03-2001 | 10,000 | 38,362 | 30.81 |
Motilal Oswal Midcap Fund Reg Gr | 24-02-2014 | 10,000 | 37,618 | 30.3 |
Edelweiss MidCap Reg Gr | 26-12-2007 | 10,000 | 34,727 | 28.24 |
Mahindra Manulife Mid Cap Fund Reg Gr | 05-01-2018 | 10,000 | 34,667 | 28.19 |
Quant Large & MidCap Gr | 11-12-2006 | 10,000 | 34,523 | 28.09 |
PGIM India MidCap Opportunities Reg Gr | Invest Online | 05-12-2013 | 10,000 | 34,392 | 27.99 |
Nippon India Growth Fund Gr Gr | 05-10-1995 | 10,000 | 34,136 | 27.8 |
HDFC Mid-Cap Opportunities Gr | 25-06-2007 | 10,000 | 32,899 | 26.86 |
Kotak Emerging Equity Sch Gr | Invest Online | 30-03-2007 | 10,000 | 32,617 | 26.64 |
If you invested in the Motilal Oswal Midcap Fund Reg Gr ten years back, your Rs 10,000 would be Rs 37,618 today.
Top 10 best performing Hybrid Mutual Funds
Hybrid mutual funds invest in a combination of multiple assets like equity, debt and sometimes gold. The below data represents some of the best performing Hybrid funds in aggressive, dynamic, conservative and equity-saving segments.
Scheme Name | AUM (Crore) | Invested Amount | Current Value | Annual Return |
|---|---|---|---|---|
Bank of India Mid & Small Cap Equity & Debt Reg Gr | Invest Online | 754.01 | 10000 | 31575 | 25.82 |
Quant Absolute Fund Gr | 2114.19 | 10000 | 30796 | 25.2 |
JM Aggressive Hybrid Gr | 305.67 | 10000 | 28837 | 23.56 |
ICICI Pru Equity & Debt Gr | 35122.02 | 10000 | 26123 | 21.15 |
HDFC Balanced Advtg Gr | 86471.32 | 10000 | 23756 | 18.87 |
Kotak Equity Hybrid Gr | Invest Online | 5621.16 | 10000 | 22923 | 18.03 |
Edelweiss Aggr Hybrid Plan B Gr | 1660.74 | 10000 | 22763 | 17.86 |
Edelweiss Aggr Hybrid Reg Gr | 1660.74 | 10000 | 22703 | 17.8 |
UTI Aggressive Hybrid Fund Reg Gr | 5511.93 | 10000 | 22482 | 17.57 |
Baroda BNP Paribas Balanced Advantage Fund Reg Gr | 3833.86 | 10000 | 21273 | 16.28 |
Source: Advisor Khoj
Conclusion
Lump sum investments in mutual funds can yield higher returns if you understand market strategies. Before investing, have a clear understanding of your financial goals, risk tolerance, and time horizon. Mutual funds are subject to market fluctuations, so patience and commitment to your long-term financial goals are key to navigating the ups and downs in investment value.
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