Have you ever been blessed with a massive sum of money suddenly? This substantial amount of cash could be a result due to various factors such as sale of investments, payment arrears, inheritance, court settlements, lottery, tax refunds, retirement fund, etc. What do you usually do with this lumpsum sum of money? Do you spend it entirely or save a part of it to invest in mutual funds? Well, it is advised to save and invest at least a part of your lumpsum amount in suitable investment options. In this article, we will understand how to invest a lumpsum sum of money.

An investor must arrange all lumpsum amount of money that they receive into different types of investments. One of the ways to invest a lumpsum amount is by investing this lumpsum sum of money in liquid funds and systematically and regularly transfer this sum of money in equity investments on a regular basis.

Criteria to invest a lumpsum sum of money in mutual funds

To invest a lumpsum sum of money in mutual fund schemes, it is important for an individual to be KYC (know your customer) compliant. An investor can do the same at KYC Registration Agency, also known as KRA or at the AMC (asset management company) office. All an investor has to do is fill an ordinary KYC form. One must remind to submit certain documents along with this KYC form such as identity proofs and copies of address proof.

Choosing the right type of investment

Once an investor is finished with their KYC formalities, they must choose the right type of investment to invest a lumpsum amount. As stated above, a good option could be setting up a systematic transfer plan (STP) and investing in liquid funds and later systematically transferring them to the equity fund of the same AMC or the fund house. Investors are advised to consult their financial advisor or mutual fund expert about the right type of investments for their investment portfolio. To invest in liquid funds, an investor must fill a mutual fund application form to buy liquid funds. One must also attach a cheque in favor of the desired liquid mutual fund scheme along with the mutual fund application form and an STP form. It is essential that the STP form clearly mentions the transferor scheme, in this case liquid funds and the transferee scheme, in this case the equity mutual fund scheme where you ultimately wish to transfer your assets. The frequency of the transfer can be daily, weekly, monthly, yearly – according to the convenience of the investor. Note that, an investor can stop STP installments by providing the banks with a written request. Do not forget to check the tax implications on your mutual fund investments. In this case, every transfer from the transferor scheme, i.e., liquid mutual fund scheme would attract capital gains tax on redemption. All investors can take the advantage of a lumpsum calculator that helps to evaluate the future value of the mutual fund schemes over a period of time. Happy investing!

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