When choosing to invest in mutual funds, an investor has to make several decisions to ensure the right type of investment for their portfolio. One such decision includes choosing the right mode of investment. An investor can invest in mutual funds either through a systematic way known as SIP (Systematic Investment Plan) or through lumpsum mode of investment. While internet is filled with articles about SIP investment, not much is covered about lumpsum investment. This article aims to act as lumpsum investment guide and providing you with some best investment options for lumpsum investment.
Investment options for lumpsum investment:
If regular income is what you are seeking for, then you might consider making a lumpsum investment in an immediate annuity plan. Investing in these securities offer investors with a tax deduction of up to Rs 1.5 lac per annum u/s 80CCC* of the IT ACT, 1961. Keep a mental note that the annuity received from immediate annuity plan is completely taxable in the hands of the investor depending on which tax slab they belong to. Hence, if you belong to a high tax slab, there would be hardly any returns left for you. Also note that the returns of this investment in significantly lower than that of fixed deposits.
If you are nearing your retirement, and want to invest a lumpsum amount, you might consider investing in SCSS – Senior Citizens Savings’ Scheme. As they are comparatively safer investment havens, these schemes are ideal for people nearing retirement. SCSS schemes are a part of Section 80C tax-saving investments and thus qualify for a tax deduction of up to Rs 1.5 lac.
Investors who wish to invest in fixed-income securities can consider investing in short-term debt funds or liquid funds. Investors investing in these schemes must realise that these mutual fund investments do not have the potential to generate significantly higher returns. However, they are relatively safer in nature. Hence, these mutual funds are ideal for those investors who have a low-risk profile and wish a high level of liquidity with their investments.
Whatever may be the type of investment you choose for your portfolio, keep several factors in mind, such as safety, age, expected returns, liquidity, your financial goals, risk profile, investment horizon, etc.
Wouldn’t it be great if you can assess your returns on mutual fund investment? Well, you can. A mutual fund lumpsum calculator helps you do the same. If you input the lumpsum amount invested, the expected rate of interest, and the expected investment horizon, lumpsum calculator will help you derive the future value of your lumpsum mutual fund. Isn’t that cool? You can also use a lumpsum return calculator today and understand how much you’d need to invest to reach a specific target amount. Happy investing!
*The tax deduction of up to Rs 1.5 lac u/s 80CCC limit is combined with that of Section 80C limit