How to invest lump sum in Mutual Funds in India?

How to invest lump sum in Mutual Funds in IndiaHow to invest lump sum in Mutual Funds in India?

If you have received your bonus or annual performance pay or any lump sum money, you might be looking for investment options to grow your money. While there are several other investment ideas available, one would think it is difficult to invest lump sum investments in mutual funds. In this article, I would elaborate various ways where you can invest your lump sum money in mutual funds in India.

How to invest lump sum in Mutual Funds in India?

Before you decide the options available, you should decide the tenure for which you want to invest such lump sum in mutual funds. Is it for short tenure, medium term or long term period.

Also Read: What are the Top 5 Best Mid-cap/Small Cap Mutual funds to invest in India?

1) Invest in Long debt mutual funds

Till recent Budget, debt mutual funds were famous as they provided good tax benefit after 1 year. Currently it is increased to 3+ years time frame to treat them as long term capital gain purpose. Even now, these are one of the best investment options to invest for 3 year time frame. If you can hold this for 36 month period, you can get long term capital gain indexation benefit in mutual funds. Investing in some of the top long term debt mutual funds like, Franklin India Corporate bond opps fund, ICICI Pru long term debt income fund, Birla SL Dynamic Bond Fund etc. would provide you good returns.

2) Invest in Short term debt funds

In case you want to park your money for 6 to 12 month period, you can opt for short term debt mutual funds. These mutual fund schemes invests in short term fixed income opportunities and debt instruments. In such cases, Mutual fund houses could sell them immediately without any risk. Some of the top ultra short term mutual funds are ICICI Pru Flexi income, SBI Magnum Income fund etc. are good options.

3) Invest in liquid funds for very short term

If you have some money which you are planning to invest or spend in a few months, but may not need them now, you can park such money in liquid funds. Liquid funds are those which invests in short term investment options which can be easily liquidated. The good part is you can sell them immediately and money would be credited to your account on the same day. The ideal investment period is 1 to 6 month period. Some of the best funds under this category are ICICI Pru Money Market Fund, SBI Magnum insta cash fund etc.

Also Read: How should you invest in Mutual Funds through Systematic Investment Plan and to be successful?

4) Use STP method to invest in equity funds for long term

One of the biggest mistake investor would do is invest a lump sum in equity funds. This may be a good strategy during market corrections or when markets are in a down trend. However, if you observe now where markets are reaching a peak and when you do not know its direction, the best way to invest a lump sum in mutual funds is investing in short term debt funds and do Systematic Transfer Plan (STP) to equity funds over a period of time. This is nothing but you are investing one time in debt funds and doing STP every month to equity fund, thereby reducing risk of investing a lump sum in mutual fund. You can do STP to equity funds considering 9 to 12 month period. Some of the top equity funds are ICICI Pru Dynamic fund, Birla SL Frontline fund, Quantum Long Term equity fund, ICICI Focussed blue chip fund etc.

Concluding remarks: Mutual funds have been providing good returns in the long run. Investing lump sum in above methods would help you to overcome market risks and provide you higher returns compared to bank FD’s.

Please note that investments in mutual funds carry market risks, you should review mutual fund schemes carefully before investing.

If you like this article, please share this on your Facebook or Twitter. This would be a special gift which you would be giving to our blog.

How to invest lump sum in Mutual Funds in India


  • sandeep dey

    Hi this is Sandeep,I have no idea abt mutual fund .i wanted to invest 40000rs for 3 yrs.can you suggest me which mutual fund shall I go for a good returns.

  • Ashok Tehare

    I am a retired person recently I have received Rs 10 lakhs as lic maturity amount.l want to invest this amount in my for at least five years.Kindly suggest in which my I should invest this amount.Will it be better to invest through systematic fund transfer plan or otherwise. Thanks

  • Vivek

    Dear Suresh

    Read thru your article.. I need your advise on STP investment investing and I hope you will be kind enough to suggest.

    -I'm 35 and have managed to create a saving of Rs.39 lacs thru my 15 years of career work savings in total which is not invested anywhere.
    -I have invested Rs.4.5 lacs (45000 each in the below 10 MFs)
    Birla SL Frontline Equity – Growth, Birla SL Top 100 – Dividend, DSPBR Focus 25 – Dividend, DSPBR Focus 25 – Growth, DSPBR Micro Cap Reg – Growth, Franklin India Smaller Companies – Growth, HDFC Balanced – Growth, HDFC Mid – Cap Opportunities – Growth, ICICI Pru Value Discovery Reg – G and Kotak Select Focus Reg – Growth
    -I have also invested Rs.6 lacs in FD (in Shriram transprt) due for maturity in march 2018.
    -My goal is to attain yearly returns of 4-5Lakhs P.A to meet my expenses, with low risk so that it will be my back up esp when i’m not employed after 2 yrs (planning to be self employed)

    – Considering this,can you kindly suggest:
    1. Since I have 39 L available, is it a good idea to invest say 7 lacs each in 5-6 liquid funds and then do a monthly STP to equity funds?

    2. If its a good idea am thinking of going for the below equity funds
    Birla Frontline Equity fund direct (large cap)
    HDFC Mid-Cap Opportunities Fund Direct Growth (mid cap)
    Franklin Prima plus fund/or Franklin India Smaller co fund (small cap)
    DSP Focussed 25 Fund Direct Growth
    IDFC Classic Equity Fund Direct Growth
    ICICI Value discovery (Diversified)
    and Axis Long term quity (ELSS)

    Can you pls suggest your mix of 5-6 equity funds?

    3. Also I understand that gains out of Liquid funds are taxable as I would do STP. I came across an interesting Liquid fund – HDFC Cash management Fund Treasury Advantage Plan – daily Dividend Reinvestment. While this fund’s returns are almost like a liquid fund, its dividend doesn’t attract a 28.3% DDT. DDT in this fund is just 15% .. So can this be a good liquid scheme to consider to put my funds?
    Can you also suggest some other similar liquid funds where there is lesser DDT? 

    4. Or instead of investing the lump sum in liquid funds, can I invest in some regular debt funds and define STPs from there to equity funds? Is that permissable?
    If so can you suggest some good debt funds?

    Thank you

  • Girija

    What is profit booking in liquid??

  • Murali

    Want to go with a STP in debt fund and transfer it to equity funds as well.Please advice in which fund to fix my amount also the tenure of it. Would be highly obliged.

Leave a Reply

Your email address will not be published. Required fields are marked *