People who invest money in mutual funds usually go for SIP, wherein a fixed amount is deposited under someone’s name. It becomes easy for them to build wealth using regular small payments. Learn what is the basic difference between mutual funds and SIP. But in some cases, the experienced investors opt to invest a huge amount of money in a direct plan when it’s not performing well but in the future will rise. They invest in direct plans where they see a huge potential of higher returns. This is knowns as a lump sum investment or one-time investment plan. Learn whether investing a Lump sum in Mutual funds the right choice for you. Where an individual invests a sum of money in a scheme which will most likely appreciate in the long run.
Some factors that affect the one-time investment plan decision
You need to be aware of the market fluctuations and for this, you can use the P/E ratio (Price to earning). For these calculations, consider the data of the last 4 quarters. You can also, consider the benchmarks for this, such as Nifty. Nifty P/E is whether closer to the lower or the upper end. There is a better chance of generating profit if the P/E is lower (closer to 14) than when it is higher (closer to 22).
Estimating potential returns & Liquidity expectations before investing
If the requirements of the investors are for the short term, then one can invest in a low volatility debt fund or liquid fund. Read on the comparison made between debt mutual funds vs fixed deposits. In addition to this, learn what are the Best debt funds to invest in 2019. Due to the low volatility of these funds, these funds are more secured as compared to equity funds for a short term perspective. Keep informed on the Best short term investments plan to invest in 2019. So, we deduce that investments in equity funds should be for the long-term to be fruitful. Learn how to evaluate best equity mutual funds. These funds require a period of 5 years or more to perform.
After the investment, you shouldn’t panic & make a rash decision if the market doesn’t fare better in the long run. This should be kept in mind that the performance will improve over time. Like, if you put in some money now in Apple Inc. and expect it to give instant returns, well it won’t end well for you. But if you’re patient with this investment & keep at it, then, in the long run, it would definitely be a wise choice to make.
SIP to lumpsum
The first time investors or investors who are not sure about the market ups and downs should consider this option of investment. In this case, the investments are in the liquid fund or Ultra-short term fund using SIP. Keep reading on How to Invest in SIP that is Best for You. Furthermore, you must read on what are the best sip plans to invest in 2019. Then you can transfer the money gradually over the course of months into the equity fund schemes. This way, you’ll be getting better returns as compared to investments in a bank & you would not have to time the market.
Pros of One-time investment plan
- Investing money in this way is better than either keeping the cash in hand or saving it into the bank account and earning low interest.
- The One-time investment plan provides convenience for the investors as the investors needn’t pay installments in the future or worry about the investment dates.
- The objective of the investment is longer. This could be in the case of children’s education, marriage, buying real estate or other.
- Investments are in the assets which guarantee to fare better in the long run and so it is important to start early. The earlier you start, the greater the long-term financial gain. You can also read on the Best investment plans to invest in 2019 or Best investment options in India
- The transaction cost of the one-time investment plan is very low if the investments are in equity markets. If you invest Rs. 10 lakh in one lump sum investment scheme, then Rs. 100 will be the commission charged. But if you divide the same that into 10 separate transactions, then you’d have to pay Rs.1,000 in total for this. Though in the case of SIP investments, there is no transaction cost (in both purchase or selling of units). But what are the best SIP plans to invest in 2019?
Cons of One-time investment plan
- The money invested in the case of a one-time investment plan, there is no involvement of investment discipline. Moreover, the investor might have to invest in low-return generating investment options if the lump sum facility is only available.
- Due to the market volatility, the investor may end up buying higher units at a time when the price is high and then witness the drop in the prices as the investments are in one go. In this case, there is no option of buying units in between or regularly. Learn how to invest in mutual funds online.
- People usually don’t consider these types of investments, especially in equity schemes. In addition to this, a lump-sum investment might not be the best option if you’d need funds in the near future. As the returns are generated if the investments are in for the long-term. Then, investing money in ultra-short-term funds or liquid funds would be a better option overall.
Our expert services at WealthBucket will make your investment in mutual funds hassle-free. Our team only believes in over-delivering our clients when you want to invest in equity funds, large-cap funds, liquid funds or multi-cap funds & many more. You can either contact us at +91 8750005655 or email us at email@example.com
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