How to invest lumpsum amount in mutual funds?

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How to invest lumpsum amount in mutual funds?

As a mutual funds investor, there are two methods by which you can invest – Systematic Investment Plans (SIPs) or Lumpsum. When you choose to invest through SIPs, a fixed amount can be invested into the mutual fund on a specified date. This can be monthly, quarterly, semi-annually or annually. However, if you have a considerable amount of cash lying idle, you can opt to invest a lumpsum investment in one single payment instead of small instalments.

An effective way to invest a lump sum amount could be to invest in liquid funds. These are types of mutual funds that invest in money-market instruments and debt. You can gradually transfer small amounts from liquid funds to an equity fund. Seasoned mutual fund investors are aware of what is liquid fund, and that liquid fund returns offer a nominally higher yield than a savings bank account. Thus, you may want to park your money in a liquid fund.

Now that we know liquid funds meaning, let us look into ways of investing in liquid funds.

How to get started?

To begin investing in a mutual fund scheme, you need to be KYC (Know Your Customer) compliant. You can approach an asset Management Company (AMC) office, registrar office or a KYC Registration Agency (KRA) for the same. Some essential documents required include identity proofs, address proofs and a duly- filled KYC form.

Choice of schemes

After completing KYC formalities, you can decide mutual funds’ schemes of your choice. To transfer from liquid funds to equity funds, you would have to set up a Systematic Transfer Plan (STP). An excellent idea would be to choose a liquid fund and equity fund from the same fund house to initiate the STP process. You can consider taking the help of a professional mutual fund advisor to make a rational investment choice.

Investing in a liquid fund

Next, you need to fill a mutual fund application form to invest in a liquid fund. A cheque in favour of the specific liquid fund scheme needs to be attached with the mutual fund application form. If you decide not to take the services of a fund manager, you can submit the form at the AMC office or investor service center indicated by the fund house.

Systematic transfer

You need to submit an STP form along with the mutual fund application form. The form indicates the trans fervor scheme (the liquid fund scheme) and the trans free scheme (the equity scheme), where the transfer needs to be made. You can make a weekly, fortnightly, monthly or quarterly transfer. You can decide the period for transfer based on your investment goals.


Follow the steps mentioned above to invest a lump sum amount in mutual funds. A vital point to remember is that you can stop an STP instruction at any time, by writing to the fund house or AMC. An essential point you may want to consider — every transfer from a liquid fund is treated as redemption and attracts capital gains tax. So, look towards making smart investment decisions to make your money grow.

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