Mutual Funds: Lump sum or small amount, which one should you choose for long-term investments?

A mutual fund investment is a long-term plan that gives you high returns in a long-term equity horizon.

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Who doesn't want to grow money? We all do. To grow your money, the simple formula is "do not let it sit at a place".

Money grows when you keep on investing. Investing money is a difficult task, especially when you are a beginner. Now the question is whether to invest lump sum amount or small amount for long term.

If you want to build a corpus for emergency or to secure your family during the tough times, investing small amount for long term is advisable. Here comes Mutual Funds into picture.

A mutual fund investment is a long-term plan that gives you high returns in a long-term equity horizon. Under the mutual fund, equity mutual funds could be your option if you are looking for 12-15% or above returns.

Ajit Narasimhan, Category Head - Savings and Investments, BankBazaar.com said, "Equity funds in India have generated close 15-17% CAGR over the past 10 years. When you compound this annually, this gives you a significant amount of wealth over an extended period of time. However, to get best returns, you must stay invested for a longer period."

The equity market is volatile and the returns are seen over a period of 5-10 years. In just one year, you may not see a 12-15% return. That will happen over a period of time.

Moreover, to add to it, you can enter mutual funds via systematic investment plan (SIP) instead of one shot investment or limp sum investment. SIP investing will helps you in averaging costs and reduces risk related to lumpsum investments.

However, if you still want to go with one shot investment for a period of one year, your best options are liquid funds and debt funds. However, these will provide returns of around 8-9% which is still higher than most Fixed deposits.

Here's a look at top equity mutual funds performance in the last one year. This asset class has given more than 20% of return in one year.

1. ICICI Pru MidcapiWIN (G): With net asset value (NAV) of 64.94 the fund gave returns of 20.98% in one year.

2. Reliance ETF Junior (G): With NAV of 281.15, the fund gave returns of 22.06% since last year.

3. SBI ETF Nifty Next (G): With NAV of 285.38, the fund gave returns of 23.24%.

4. IDBI Nifty Junior DP (G): With NAV of 21.98, the fund gave returns of 22.90%

5. ICICI PruNiftNxt50DP (G): With NAV of 25.02, the fund gave returns of 23.07%.

Disclaimer: This story is for informational purposes only and should not be taken as an investment advice.

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