Lumpsum Investment
InvestmentsA lumpsum investment is a one-time large investment rather than periodic instalments. Best used during market corrections or when receiving a windfall. Use STP (Systematic Transfer Plan) to invest lumpsum into equity gradually.
In detail
Lumpsum invested at market lows outperforms SIP mathematically. But timing markets is nearly impossible. Compromise: park lumpsum in liquid fund, transfer fixed amount to equity via STP over 6-12 months.
Formula
Future value = P x (1 + r)^nnRs 5L at 12% for 15 years = Rs 27.4L
Real-life example
🇮🇳 India example
Mohan receives Rs 10L bonus. Parks in liquid fund (7%), sets STP of Rs 83,333/month into Nifty 500 for 12 months. Averages into market reducing timing risk.
Frequently asked questions
Lumpsum or SIP -- which is better? ▼
Lumpsum at market lows beats SIP. But since timing is impossible, SIP is the practical better approach for regular income. For windfalls, use STP.