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Lump Sum Investments: A Guide to Boosting Your Wealth with Extra Earnings

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Published Date: 08 Jul 2024Updated Date: 27 Dec 20246 mins readBy MOFSL

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
Source: Advisor Khoj         

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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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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