Best Mutual Fund for Lumpsum Investment: What are the Three Main Categories of Mutual Funds?
Best Mutual Fund for Lumpsum Investment: An Overview
Investment has become a huge part of an individual’s life. People are finding ways to earn money even when they are asleep, they are not only earning active income but also passive income by uploading videos online and getting millions of views or by simply investing their money in the right financial security. However, to earn passive income via investing, you need to have the proper knowledge to place your eggs in the right basket. This article will not only help you gain that knowledge but also tell you about the Best Mutual Funds for Lumpsum Investment 2022 so that you get the highest returns based on your goals.
What is a Mutual Fund?
In simple words, a Mutual Fund is a type of organization that pools money from various people/investors, who share a common investment objective, and invests this amount in various financial securities such as stocks and bonds. The most common ways to invest in it is a SIP (Systematic Investment Plan) or in Lumpsum. In a lumpsum mutual fund form of investment, you invest the entire amount in a single payment at a particular time, as opposed to in multiple small amounts over a period of time in a SIP.
Mutual Funds are managed by professional fund managers for which they charge a Management Expense (also called an Expense Ratio), which is generally between 1-3% of your total investment, as they help you earn more. Mutual Fund is a very good form of investment as it offers investors a lot of benefits, such as Liquidity, Diversity, and Expert Management.
What are the different types of Mutual Funds in India?
There are various types of Mutual Funds. Although, the three most common types of Mutual Funds are as follows:
- Equity Mutual Funds:
In this, the Mutual Fund organization will simply invest your money in equities, which is basically the stock market. Here, the risk is slightly more in comparison to the other two types of Mutual Funds, hence offering a chance to earn higher returns.
- Debt Mutual Funds:
It is similar to the Equity Mutual Fund. The only difference is that after collecting the pool of money, the organization will invest the amount in Debt instead of Equity. One needs to keep in mind that this form of investment is relatively safer as it strikes out the risk of stock fluctuation.
- Hybrid Mutual Funds:
As the name suggests, it is a combination of Equity Mutual Fund and Debt Mutual Fund, in which the amount collected is partly invested in equity and the remaining is invested in Debt.
Best Mutual Funds for Lumpsum Investment
Thanks to such rapid advancements in technology, there are so many options of Mutual Funds available for the investor, which they can access via a mobile phone right from their fingertips.
Mutual Fund Lumpsum Investment is growing at a rapid pace. And many institutes market their Mutual Funds as the best lump sum mutual fund. Some of the most famous Mutual Funds (based on the types) for Lumpsum Investment are as follows:
- Equity Mutual Funds:
- Canara Robeco BlueChip Equity Fund Direct-Growth: This scheme is launched by Canara Robeco Mutual Fund. This Mutual Fund has a fund size of ₹7593.28 Cr and an Expense Ratio of 0.39%. This fund has 94.6% investment in domestic equities, out of which, 75.4% is in Large Cap Stocks and 6.58% is in Mid Cap Stocks. With a NAV of ₹45.77 (0.22%), it is suitable for people who are looking to invest money for a minimum of 3 - 4 years and want higher returns, while being ready for moderate losses as this Mutual Fund has a Very High Risk-O-Meter. It held a Crisil Rank 3 in the previous quarter.
- UTI Nifty200 Momentum 30 Index Fund Direct-Growth: This scheme is launched by UTI Mutual Fund. This Mutual Fund has a fund size of ₹1711.31 Cr and an Expense Ratio of 0.42%. This fund has a 100% investment in domestic equities, out of which, 58.16% is in Large Cap Stocks and 37.33% is in Mid Cap Stocks. It has a NAV of ₹13.0355 (1.34% and has a Very High Risk-O-Meter. It did not have a Crisil Rank in the previous quarter.
- Debt Mutual Funds:
- HDFC Credit Risk Debt Fund Direct-Growth: This scheme is launched by HDFC Mutual Fund. This Mutual Fund has a fund size of ₹8630.76 Cr and an Expense Ratio of 0.96%. This fund has a 95.16% investment in Debt, out of which, 7.97% is in Government Securities and 82.27% is in Low-Risk Securities. It has a NAV of ₹10.7397 (0.03%) and has a Moderately High Risk-O-Meter. It held a Crisil Rank 2 in the previous quarter and is suitable for people who want to invest for a longer duration and reduce their risk.
- Nippon India Credit Risk Fund Direct-Growth: This scheme is launched by Nippon India Mutual Fund. This Mutual Fund has a fund size of ₹1010.67 Cr and an Expense Ratio of 1%. This fund has a 95.93% investment in Debt, out of which, 16.82% is in Government Securities and 56.52% is in Low-Risk Securities. It has a NAV of ₹30.196 (0.05%) and has a High Risk-O-Meter. It held a Crisil Rank 3 in the previous quarter and is suitable for people who want to invest for a longer duration and reduce their risk.
- Hybrid Mutual Funds:
- ICICI Prudential Equity & Debt Fund Growth: This scheme is launched by ICICI Prudential Mutual Fund. This Mutual Fund has a fund size of ₹19613.85 Cr and an Expense Ratio of 1.78%. This fund has a 69.76% investment in Domestic Equities (out of which 55.55% is in Large Cap Stocks, 7.38% is in Mid Cap Stocks, and 1.72% is in Small Cap Stocks) and a 20.03% investment in Debt (out of which, 14.12% is in Government Securities and 5.21% is in Low-Risk Securities). It has a NAV of ₹232.51 (0.3%) and has a Very High Risk-O-Meter. It held a Crisil Rank 5 (which proves a very good performance among peers) in the previous quarter.
- Quant Absolute Fund Direct-Growth: This scheme is launched by Quant Mutual Fund. This Mutual Fund has a fund size of ₹499.87 Cr and an Expense Ratio of 0.56%. This fund has a 79.41% investment in Domestic Equities (in which 57.41% is in Large Cap Stocks, 16.25% is in Mid Cap Stocks, and 3.6% is in Small Cap Stocks) and a 13.39% investment in Debt (in which, the entire 13.39% is in Government Securities). It has a NAV of ₹311.3773 (0.79%) and has a Very High Risk-O-Meter. It held a Crisil Rank 5 (which proves a very good performance among peers) in the previous quarter.
Lumpsum is a large chunk of money and should be invested carefully in the best fund for lumpsum investment, and lumpsum investment in mutual funds is a great option. Although, it is suggested to avoid investing in a Lumpsum amount in an Equity Mutual Fund without conducting thorough research because the timing of your investment has a significant impact on the returns as the price of stocks keeps fluctuating.
Though, every individual is different: has a different thought process, a different taste, a different time horizon, a different risk appetite, a different investment purpose, and a different goal. Hence stating just one Mutual Fund for lumpsum investment, that would suit everyone is neither rational nor reasonable. Therefore, the above-mentioned best lump sum mutual funds are all great options for investors and should be considered and compared to make an informed decision by selecting the right Mutual Fund, based on one’s needs and goals. Hence, the Best Lumpsum Mutual Fund 2022 for you would be the one that fits your profile.
While keeping your Investment Objective, Time Horizon, and Risk Tolerance in mind, do not forget to consider the following factors before choosing the best MF for Lumpsum Investment 2022:
Fund Performance, Net Asset Value, Expense Ratio / Management Expense, Exit Load, Asset Management Company (AMC) Track Record, Scheme’s Asset Under Management (AUM), and Fund Manager’s experience.
Is it good to invest lumpsum in Mutual Funds?
Every investor is different and has different needs and goals and hence should decide based on their own goals, although ideally it is not a great option until it is made in a weak market and invested smartly to get higher returns in the long-term.
Can I invest a lumpsum amount every month?
It all depends on your financial availability and goals. If you keep the lumpsum factors in mind and make an informed decision, you can invest in lumpsum amounts every month instead of a SIP.
What is the minimum lumpsum amount that needs to be invested?
The normal minimum lumpsum investment for the first time is ₹5000. And can be reduced in the subsequent investments. Although, it can vary from scheme to scheme and Mutual Fund Institutes to Institutes.
What is the significance of Mutual Fund Ratings?
A rating is a statistic based on the past risk and returns performance of a mutual fund. This allows you to compare different funds in the same category over time. Mutual funds are rated by independent organizations such as CRISIL, Value Research, Morningstar, and others.