How To Calculate Lump Sum Investment?


The secret behind every successful investment is proper planning. When you have a solid plan in mind, it becomes easier to choose an investment option, tenure and type of investment.

Talking about the types of investments, there are two ways you can invest here. You can either invest a corpus in go or smaller instalments every month. Both these investment options satisfy different goals but demand proper planning.

Let us learn a bit more about these investment types and see how you can calculate the investment for better results.

What is a lump sum investment?

A lump sum investment is when you invest a corpus amount in an investment option. Investing like this has some prerequisites and benefits.

  • The main prerequisite here is the amount of money. You should be comfortably able to invest a considerable corpus of money without it constraining your day-to-day budget in anyway.
  • Since you are putting in a corpus you should ideally have a thorough understanding about the market and the investment vehicle you are opting. You should consider to time the investment so that you get the best out of it.
  • You should have set goals. Lump sum investments usually aim to either appreciate or protect your capital. If your aim is to protect the capital, the you should ideally choose an investment option that is conservative. On the contrary, if you aim to appreciate your capital, you should ideally look for a aggressive investment option. Here, having a set goal helps you choose an investment options.
  • Compounding is something that greatly aids the investment here. Compounding is where the returns from you investment are reinvested into the corpus so that the compounded corpus starts to earn returns as well.

What is a systematic investment plan?

The above investment method is suitable for someone who has a considerable amount of money to invest in. But most investors may not have this luxury. SIPs give them the option to invest.

  • The goals of investing through an SIP is quite different compared to investing a lump sum amount of money. SIP investments are mostly aimed building a corpus with time.
  • The greatest advantage with SIP is that you have greater flexibility. You have the option to choose an instalment amount as low as Rs.500 per month and still create a corpus that is considerably large.
  • The flexibility further aids with the fact that you have the liberty to change the monthly instalment every now and then to account for your increased income. You can also stop the instalments easily as well. If you are investing in a fund with a lock-in period, you can easily redeem the same as well.

Calculating lump sum investments

Lump sum investments should be calculated according to your goals. For this, you should have a final dream amount in your mind and should invest according to the potential returns.

For instance, if you are trying to build a retirement corpus with the current corpus you have, you should have

  • A dream amount
  • A reasonable tenure

Considering the above two factors, you can select the third factor – the return potential of the fund.

Furthermore, you should consider your risk appetite as well while choosing a fund.

Calculating SIP investments

Similar to the above case, SIP investments should be made according to a dream amount as well.

For instance, if you are trying to build the same retirement fund here, you should have a dream retirement corpus and the time you to build it in mind. Then according to that, you can select a fund with suitable return capability. Here, too, your risk appetite should be a deciding factor.

Proper planning and calculating that help you get the maximum benefits out of your investment. Follow the above pointers and ensure you plan properly.

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