8.11What is lump-sum investment?
1What is it?
A lump sum is investing a large amount at once.
2Why does it exist?
Useful when you receive a bonus or inheritance. If markets rise afterwards it beats SIP; if they fall, it hurts more.
3Practical use
Many investors move a lump sum into a liquid fund and use an STP (Systematic Transfer Plan) to move it into equity monthly, spreading the timing risk.
4Quick revision
- All money at once.
- Higher timing risk.
- STP spreads it out.
5Knowledge check
Q1. What is STP?Show answer
Systematic Transfer Plan: moving money gradually from one fund to another.
Q2. When does lump sum beat SIP?Show answer
When markets rise soon after investing.
Q3. Main risk of lump sum?Show answer
Investing just before a fall.