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You might have received gratuity from your employer, or the RD account you had opened a while ago might have matured, leaving a lump sum of Rs.1 lakh in your hands. Wherever the corpus is coming from, you might be looking for the prospect of investing this lump sum in mutual funds to gain reasonable returns.
However, deciding on the best mutual fund options to invest your money depends on the duration you are willing to stay invested and how much risk you are ready to take. We suggest the following steps for you to arrive at the right mutual fund scheme for you.
Step 1: Identify the category of mutual funds you would like to invest in. Experts suggest that you go for equity funds if you are sure to stay invested for a minimum of five to seven years. If you are on the risk-averse side or would like to remain invested for up to three years, you can go for debt funds. If you want to raise the merits of both worlds, you can go for hybrid funds.
Step 2: Choosing the right fund under the selected category is another crucial step. While you are looking out for the fund options, keep the following factors in mind:
Step 3: Since it is not possible to point at one particular fund as the best fund, it is recommended that you diversify your portfolio and invest in more than one fund to reduce the risk.