Power of Rs 1 lakh one-time Investment: When we talk about mutual fund lump sum investment, we generally think that it is for those who have a large sum for investments, but it’s not the case.

If one has a small amount and their investment horizon is long, they can generate sizeable capital gains from that sum also.

The condition is to stay in investments for a long time.

Investments reward the patience of an investor who stays firm in the whirlwind of market fluctuation.

If one manages to do so, they can create a corpus multiple times larger than their investment.

Know how a lump sum investment works; when it is suitable; who may go for it; and in how many years a Rs 1,00,000 one-time investment can create a corpus worth Rs 10 lakh, Rs 25 lakh, and Rs 50 lakh.

What is one-time (lump sum) investment in mutual funds?

Mutual fund investors can invest in a mutual fund scheme through a lump sum and systematic investment plan (SIP).

In a SIP, they can invest periodically in a cycle that can match with their earning cycle.

In a lump sum investment, the investor invests the amount one time and lets it grow.

As the fund size grows, the investment also grows.

Who can have one-time investment?

A one-time investment is for investors who have a long-term investment horizon.

The reason is that when you invest a lump sum, you buy all units of net asset value (NAVs) at the same rate, unlike in SIP, where you purchase them at different rates every investment cycle.

So, the NAV rate of a one-time investment can decline and take your lump sum amount into negative in the short term.

But in the long term, the market is most likely to grow, and with that, your investments will also rise.

Sometimes investors invest via lump sum thinking that the market is already down and will recover from here.

But it is impossible to know whether the market will slip further.

So, it is always better to use a one-time investment for the long term.

How patient pays to investors 

If you invest Rs 2 lakh via a lump sum in a mutual fund, where you don’t require the amount in the near future and need it in the long term, here’s how your Rs 2 lakh investment can grow in 10, 20, and 30 years at an annualised return of 12 per cent.   

In 10 years, estimated capital gains will be Rs 4,21,170, and the estimated corpus will be Rs 6,21,170.

In 20 years, estimated capital gains will be Rs 17,29,259, and the estimated corpus will be Rs 19,29,259.

In 30 years, estimated capital gains will be Rs 57,91,984, and the estimated corpus will be Rs 59,91,984.

How Rs 1 lakh investment can grow to Rs 50 lakh

Here, in phases, we will see how a Rs 1 lakh one-time investment can grow to Rs 50 lakh at a 12 per cent annualised rate of return.

In 10 years, estimated capital gains will be Rs 2,10,585, and the estimated corpus will be Rs 3,10,585.

In 20 years, estimated capital gains will be Rs 8,64,629, and the estimated corpus will be Rs 9,64,629.

In 30 years, estimated capital gains will be Rs 28,95,992, and the estimated corpus will be Rs 29,95,992.

In 35 years, estimated capital gains will be Rs 51,79,962, and the estimated corpus will be Rs 52,79,962.

Power of compounding

If we see the example above, we can see how the Rs 1 lakh investment is growing faster with time.

It took 10 years to go from reaching Rs 9,64,629 to Rs 29,95,992.

But in just 5 years, the estimated corpus grew from Rs 29,95,992 to Rs 52,79,962.

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)