I recently received Rs. 2 lakh after an old Fixed Deposit matured. I want to invest this entire amount in a Mutual Fund to earn higher returns than a new FD. What are the best Mutual Funds for such lumpsum investments?
Anuj
If you want to make a lump sum investment in Mutual Funds, you should stay away from Equity Funds. That’s because the timing of your investments will have a significant impact on the returns that you receive. But that doesn’t mean you shouldn’t invest in Mutual Funds. Debt Funds are an excellent option for lump sum investments. They can deliver better returns than FDs and don’t have any lock-in too.
Now, if you are investing for the short term, up to 1 year, you can pick Liquid Funds, Ultra Short Duration Funds, or Money Market Funds. These funds provide returns with relatively less volatility and are a good option for the short duration.
On the other hand, if you plan to stay invested for more than 1 year and up to 3 years, Short Duration Funds, Banking and PSU Funds, and Corporate Bond Funds are the better choice. These Debt Funds provide an ideal balance between risk and return if you are investing to achieve medium-term goals.
| Best Debt Funds for Lumpsum Investments | ||
| Fund Name | Fund Category | ETMONEY Rank |
| Quant Liquid Plan | Liquid Fund | 1 |
| Kotak Savings Fund | Ultra Short Duration Fund | 1 |
| Nippon India Money Market Fund | Money Market Fund | 1 |
| ICICI Prudential Short Term Fund | Short Duration Fund | 1 |
| IDFC Banking and PSU Debt Fund | Banking and PSU Fund | 1 |
| ICICI Prudential Corporate Bond Fund | Corporate Bond Fund | 1 |
*ETMONEY rankings are dynamic and subject to change.
If you are keen to invest in Equity Funds, your best option is to opt for a Systematic route to investing. This ensures the impact of market conditions on returns gets minimized as you will be investing at different market levels. One way to invest is to keep the lump sum amount in your bank account and start a SIP in the Equity Mutual Fund of your choice.
Alternatively, you can invest the lump sum in a Debt Fund such as a Liquid Fund or Ultra Short Duration Fund and start a Systematic Transfer Plan (STP). STPs or Systematic Transfer Plan is a way to transfer your funds from one fund to another at regular intervals. The concept is the same as SIP, but the money goes from your holding in a fund rather than your bank account.
From the Equity Mutual Funds universe, you can consider picking funds from ELSS Tax Saver Funds, Flexi-cap, Large and Mid-Cap, or Mid Cap categories.
| Fund Name | Fund Category | ETMONEY Rank | 5 Year Returns |
| Quant Tax Plan | ELSS | 1 | 23.92% |
| PGIM India Flexicap Fund | Flexi-cap Funds | 1 | 20.62% |
| Mirae Asset Emerging Bluechip Fund | Large and Midcap Funds | 1 | 21.74% |
| PGIM India Midcap Opportunities Fund | Midcap Funds | 1 | 21.42% |
*5 year returns as of 7th September 2021. ETMONEY rankings are dynamic and subject to change.
