Best ways to invest a lump sum of Money in India
Allocation of Assets plays a crucial role
Who doesn’t want to own a lump sum amount irrespective of the source it comes from? You may win a lottery or inherit a huge amount from your ancestral property?
Many a times, owning a huge amount appears a bane when we are confused about the venues to invest the same.
“The art is not in making money, but in keeping it.” – Proverb
Here goes a simple guide for you to understand where the huge money you have in your hand can be safely invested in a profitable manner.
Allocation of Assets plays a crucial role.
It is important that you allocate funds for emergencies over and above spending for the regular commitments in life. Once you are done with funds allocation for emergency situations, it is time you look out for other venues to invest your money
At this stage of investment planning, you have four options to choose from to invest the huge amount that is in your possession.
1. Equity – Basically a Mutual Fund product or Direct Stock Market Investment, investing in Equity means buying ownership of the businesses that are traded by Companies in a public manner. Directly investing in Stock market has its own risk – when someone having no prior knowledge of equity markets starts investing directly in stocks only to lose money. It is always advisable to invest in good Mutual funds. For Equity Funds are generally classified based on risk levels. Some types of Equity Funds that are popular among investors are Diversified Equity Fund, Index Funds, Thematic Funds, Equity Linked Savings Scheme and Sector Funds. You may decide to invest the huge money you have either under the Growth option that multiplies your money in a cumulative manner. You may decide to invest under the Dividend option which will help you manage your short term commitments. Equity is one of the best options to invest your huge money in since it is professionally managed and offers high scope of liquidity.
2. Debt – Debt is one of those Asset classes that are less volatile in nature. Investing in Debt will mean investing lump sums of money. This will suit your current plan of investing the huge sum you have in your hand. Remember to keep in mind that investing in Debt means varying rate of returns since the same is not a fixed one. Another point to note while investing in Debt Funds is its reliance on the scheme the Fund Manager decides to park the same.
3. Real Estate – You may choose to invest your huge money in Real Estate if you are ready to wait. Investment in Real Estate must be looked only in terms of long term. Real Estate may not work out in the planned manner at all points of time when looked at as a short term venture.
4. Gold – Investing huge money in Gold depends on the exact quantum of money involved. Investing too huge an amount in Gold may mean Insurance at times of inflation and disaster. However, owing to the slow volatility rate, the yield from the investment will be lower than other forms of investment. Investing huge amounts in Gold will also mean making up the mind to deal with storing issues and managing transactions.
To summarize, the best way to invest lump sum of money is to:
- Invest the total amount in Equities if you are a risk thirsty investor. Remember, when you go in for this approach, you may get lucky if the trend arrow moves upwards. However, when there is downfall in the money market, you are risking your entire amount to market fluctuations. One consoling factor in this option is, Equity markets are mostly on the raise going by the trends in the past. Investing in Equity can be one of the safest ways to park your huge funds since the same is professionally managed. Though the returns from investment on Equity are market dependent, the efficiency of the Fund Manager many a time earns huge profits too.
- The other option you have to invest your large sum of money is to invest the same every month in a staggered manner. This will help you buy increased number of units when the market is low earning you profit when the market strikes a high.
- The third option you have to invest the huge sum you have is to purchase Debt or Liquid Funds initially. You can then opt to go in for a Systematic Transfer Plan (STP). This will in turn fund a Gold Fund or a diversified Equity Fund over a period of one and a half to two years time.
Hope the above information pertaining to the various investment options available for investing huge chunks of money was useful to you.
With the clarity of mind pertaining to options available for investment, invest the huge amount you have choosing the avenue that best suits your requirement. Remember, the high levels of flexibility and patience you exhibit will help your money grow multi-fold.