A lump sum investment or one-time investment is a way to invest in mutual funds. In this method, investors only need to put in money once and wait for the growth. The good thing about a lump sum investment is you don’t need to make regular investments like SIP, but it is always better to invest the idle money using this investment method, as you are investing a big amount at a single time. This type of investment is generally opted for when the market is bearish, say financial planners. The price of mutual funds in lump sum investments depends on the market cycle.
This article will talk about how one can create a corpus of Rs 5 crore with a Rs 5 lakh one-time investment. Check calculations below:
If a person invests Rs 5,00,000 in a mutual fund at once, they can create over Rs 5.5 crore corpus in 40 years. Assuming an annualised return of 12.5 per cent can help you achieve this goal.
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Understand with calculations
Total investment: Rs 5 lakh
Time: 40 years
Estimated returns: Rs 5,50,99,502 (Rs 5.5 crore)
Total value: Rs 5,55,99,502 (Rs 5.6 crore)
Assume an annualised return of 13 per cent on Rs 5 lakh investment
Calculations
Total investment: Rs 5 lakh
Time: 38 years
Estimated returns: Rs 5,14,93,716 (Rs 5.1 crore)
Total value: Rs 5,19,93,716 (Rs 5.2 crore)
At an annualised return of 13 per cent, investors can achieve their financial goal in 38 years.
What if a person invests Rs 6 lakh?
If a person invests Rs 6 lakh in mutual funds, they can achieve this goal at an annualised return of 12 per cent, as per the calculations.
Calculations
Total investment: Rs 6 lakh
Time: 40 years
Estimated returns: Rs 5,52,30,582 (Rs 5.5 crore)
Total value: Rs 5,58,30,582 (Rs 5.6 crore)
Now, let’s assume an annualised return of 12.5 per cent on Rs 6 lakh investment
Calculations
Total investment: Rs 6 lakh
Time: 38 years
Estimated returns: Rs 5,21,16,565 (Rs 5.2 crore)
Total value: Rs 5,27,16,565 (Rs 5.3 crore)
This means you can achieve your goal two years early if the annualised return is 12.5 per cent.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.
