How to invest a lump sum of Rs. 10 lakhs in equity mutual funds?

Published: June 14, 2022 at 6:00 am

A reader on our Youtube Q & A session asked, ” Hi, First of all, congratulations on providing a platform for people to ask questions. Usecase: Let’s say I have a sum of 10 lacs to invest in the market for the long term(10+ years) for wealth maximization. I plan to park this money into an ultra-short debt fund, and from there, I will do STP to Nifty Index funds.”

“My questions are Q1: Can I do a lumpsum investment of 10 lacs into an ultra-short debt fund, or do I need to use some SIP. If I need to use SIP, how to calculate the SIP amount? Q2: How much should be the STP amount in order to transfer funds from the ultra-short debt funds to Nifty index funds?”

There are some questions an investor needs to ask himself before proceeding.

1: Will this amount be associated with a single goal or multiple goals? If it is the latter, for each goal what is the current asset allocation? If I invest Rs. 10 lakhs in equity what will be the new asset allocation? Is the new asset allocation desirable for each need?

If Rs. 10 lakhs investment into equity will skew the asset allocation the wrong way (too much equity for the need) then it would be better to suitably split the investment between equity and fixed income as per the needs of each goal. 


Build a complete financial plan with our Robo Advisory Tool. More than 1000 investors and financial advisors use it!
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)


New Tool! => Track your mutual funds and stocks investments with this Google Sheet!

Now assuming it is okay to invest the lump sum into equity, it is best to define the lump sum.

2: What is the value of this lump sum divided by your current equity investments? For example, if you currently hold Rs. 1 Crore in equity then this lump sum is 10% of your equity investments. If you only hold Rs. 18 lakhs in equity then the ratio is 55%

3: What is the value of this lump sum divided by your monthly investment in equity? For example, if you invest Rs. 4 lakhs each month in equity this lump sum is 2.5 times larger. However, if you invest Rs. 75,000 in equity each month then this lump sum is about 13.3 times larger.

So that gives you a measure of how big this lump sum is. A lump sum that is only 10% or lower than your equity holdings can be invested in one shot or may be spread over a few weeks. The same applies to a lump sum that is only 2-3 times your monthly equity investment.

There is no need to first invest the lump sum in an ultra-short-term fund or any other kind of debt fund. There is no need to start an STP. Directly and manually invest the money from your bank account to an equity fund gradually over a period of your liking – over 10 weeks or over 10 months. It matters little over the long term. See: Investing a lump sum in one-shot vs gradually (STP) in an equity mutual fund (backtest results).

Just choose a duration that makes you comfortable but please do not claim it is a superior choice or will produce a better outcome. No one knows that!

People associated with mutual funds will tell you to first park the money in a liquid fund and then start an STP in an equity fund. They do this to ensure the 10 lakhs stay with them from day one. There is no benefit for the investor in doing this.

I have to make an investment in a debt fund. Can I do this in one shot or should I spread the investment? Investments in short-term debt funds (overnight, liquid, money market etc) can be done in one shot. For longer duration funds, inexperienced investors can invest in a few instalments.

I have to switch a lump sum from one equity fund to another. Is an STP necessary for this? No. You can invest it in one shot. You are only jumping from one frying pan to another.

In summary, once the investor decides a particular lump sum investment in equity is suitable for their future needs, they can spread the investment over a few weeks to a few months as per their comfort and directly invest from their bank accounts to the equity fund. All that matters is that we invest it without hesitation. Over the long term, market volatility will ensure the method of investment is irrelevant.

Do share if you found this useful

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 1000 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2800 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 675 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps