PocketCal

Lumpsum investing means putting a large, one-time amount into a mutual fund at once, rather than spreading it over time via SIP. For example, investing ₹1,00,000 in an equity mutual fund in one go is a lumpsum investment.

The entire amount starts compounding from day one, which can generate higher returns if markets go up after your investment. Lumpsum works best when you have idle surplus cash and market valuations are reasonable. The future value is calculated using the formula: FV = P × (1 + r)ⁿ, where P is the invested amount, r is the annual return rate, and n is the number of years.

Historically, equity mutual funds in India have delivered 12-15% annualized returns over 10+ year periods, while fixed deposits offer 6-7.5% per annum. However, mutual fund returns are market-linked and not guaranteed, whereas FD returns are fixed and assured.

• Equity Mutual Funds: 12-15% p.a. (long-term average, not guaranteed)
• Debt Mutual Funds: 7-9% p.a. with better tax efficiency than FDs
• Fixed Deposits: 6-7.5% p.a. (guaranteed, but fully taxable)

For long-term goals (5+ years), equity mutual funds have consistently outperformed FDs after adjusting for inflation.

To choose the right mutual fund for your lumpsum investment:

1. Define your goal and time horizon — equity funds for 5+ years, debt funds for 1-3 years, hybrid funds for 3-5 years.
2. Check the fund's track record — compare 3-year, 5-year, and 10-year returns against its benchmark index.
3. Look at the expense ratio — lower is better, as it directly impacts your returns.
4. Consider the fund manager's experience and consistency in delivering performance.
5. Match the fund category to your risk appetite — large-cap for lower risk, mid/small-cap for higher potential returns.
6. Prefer direct plans over regular plans for 0.5-1% lower expense ratio.