Investing your money is very important. The sooner you start investing, the better. Best investment instruments to invest in, without any prior investment knowledge, are mutual funds. mutual fund schemes in India have grown exponentially over last few years.

For a lump sum (one-time) investment, debt funds are a much better option as compared to equity oriented mutual funds. It is wise to invest for shorter duration with easy liquidity.

This is will reduce the risk of change in interest rate as well as give a better return than parking in fixed deposits (FDs).

10 Best Mutual Funds for Lump Sum Investment in 2018

It is a good decision to invest a lump sum in debt mutual funds. There are multiple types of debt funds that you can choose from depending on the duration and risk you are willing to take.

Here’s the list of top 10 best mutual funds for parking your lump sum amount in 2018.

1. HDFC Short Term Debt Fund

This is a short-term debt fund launched on January 1, 2013. It is a debt fund with very low risk and has given a return of 8.68% since its launch.

Returns per annum over the years from this fund are:

HDFC Short Term Debt Fund
Fund Name 1Y 3Y 5Y Category Risk
HDFC Short Term Debt Fund - Direct - Growth 5.78% 7.5% 8.57% Debt
(Short Duration)
Moderately Low

Invest in HDFC Short Term Opportunities Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹9,490 Cr
Minimum SIP ₹500
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.25%
Exit Load NIL
Type  Open-ended

If you want to invest for a shorter duration, say for 3 months or more, this is one of the best debt funds for you to invest in.

The fund mostly relies on short-term corporate debt for returns, with sovereign exposures at 10-12% in the past one year.

And it maintains a very conservative portfolio, both on credit quality and duration.

2. Franklin India Ultra-Short Bond Fund

This is an ultra short bond fund launched on January 1, 2013. It is a debt fund with very low risk and has given a return of 9.53% since its launch.

Returns per annum over the years from this fund are :

Franklin India Ultra-Short Bond Fund
Fund Name 1Y 3Y 5Y Category Risk
Franklin India Ultra Short Bond Fund - Direct - Growth 7.87% 8.81% 9.31% Debt
(Ultra Short Duration)
Moderate

Invest in Franklin India Ultra Short Bond Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹6,979 Cr
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.35%
Exit Load NIL
Type  Open-ended

This fund invests in short-term debt securities with some small portion in long-term securities. The returns in this category are similar to the returns offered by short-term funds.

3. DHFL Pramerica Short Maturity Fund 

This is a short-term debt fund launched on January 1, 2013. It is a debt fund with low risk and has given a return of 9.46% since its launch.

Returns per annum over the years from this fund are:

DHFL Pramerica Short Maturity Fund
Fund Name 1Y 3Y 5Y Category Risk
DHFL Pramerica Short Maturity Fund - Direct - Growth 5.13% NA NA Debt
(Short Duration)
Moderate

Invest in DHFL Pramerica Short Maturity Fund Now 

Rating by Groww 4 star
AUM (Fund Size) ₹1,696 Cr
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.43%
Exit Load NIL
Type  Open-ended

The objective of this scheme is to generate a steady return with low to medium market risk by investing in a portfolio of short-medium term debt and money market securities.

4. ICICI Prudential Regular Savings Fund

This is a Monthly Income Plans (MIPs) type Debt Mutual Fund launched on January 3, 2013. It is a debt fund with a moderately low risk and has given a return of 10.32% since its launch.

Returns per annum over the years from this fund are:

ICICI Prudential Regular Savings Fund
Fund Name 1Y 3Y 5Y Category Risk
ICICI Prudential Regular Savings Fund - Direct - Growth 4.22% 9.81% 12.35% Hybrid
(Conservative)
Moderately High

Invest in ICICI Prudential Regular Savings Fund

Rating by Groww 5 star
AUM (Fund Size) ₹1,460 Cr
Minimum SIP ₹1,000
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark CRISIL Hybrid 85+15 Conservative since its launch.
Age of the fund 5 years old
Expense Ratio 1.39%
Exit Load If redeemed between 0 Year to 1 Year, exit load is 1%
Type  Open-ended

The objective of this scheme is to generate long-term capital appreciation from a portfolio that is invested 70 to 100% in money market and debt instruments and up to 30% in equity securities with S&P CNX Nifty stocks as the universe.

5. Franklin India Low Duration Fund

This is an Ultra Short Term Fund type Debt Mutual Fund launched on January 1, 2013. It is a fund with very low risk and has given a return of 9.73% since its launch.

Returns per annum over the years from this fund are:

Franklin India Low Duration Fund
Fund Name 1Y 3Y 5Y Category Risk
Franklin India Low Duration Fund - Direct - Growth 7.51% 8.93% 9.53% Debt
(Low Duration )
Moderate

Invest in Franklin India Low Duration Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹5,586 Cr
Minimum SIP ₹1,000
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.45%
Exit Load If redeemed between 0 Months to 3 Months exit load is 0.5%;
Type  Open-ended

The fund aims to earn regular income through investment primarily in domestic fixed income instruments and highly rated debt securities.

6. Franklin India STIP

This is an Ultra Short Term Fund type Debt Mutual Fund launched on January 1, 2013. It is a fund with low risk and has given a return of 10.04% since its launch.

Returns per annum over the years from this fund are:

Franklin India STIP
Fund Name 1Y 3Y 5Y Category Risk
Franklin India STIP - Direct - Growth 6.95% 8.68% 9.89% Debt
(Short Duration)
Moderate

Invest in Franklin India STIP Now

Rating by Groww 5 star
AUM (Fund Size) ₹9820 Cr
Minimum SIP ₹500
Minimum SWP ₹1000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.89%
Exit Load If redeemed between 0 Year to 1 Year, exit load is 0.5%;
Type  Open-ended

The objective of this scheme is to generate stable returns by investing in fixed income securities with shorter maturity periods likely to be less than three years.

The average maturity of the portfolio of the scheme is likely to be between 4 months and 12 months, and the maturity of individual securities in the scheme is likely to be less than 3 years.

7. DHFL Pramerica Short Maturity Fund 

This is a short-term debt fund launched on January 1, 2013. It is a debt fund with low risk and has given a return of 9.46% since its launch.

Returns per annum over the years from this fund are:

DHFL Pramerica Short Maturity Fund
Fund Name 1Y 3Y 5Y Category Risk
DHFL Pramerica Short Maturity Fund - Direct - Growth 5.13% NA NA Debt
(Short Duration)
Moderate

Invest in DHFL Pramerica Short Maturity Fund Now 

Rating by Groww 4 star
AUM (Fund Size) ₹1,696 Cr
Minimum SIP ₹500
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.43%
Exit Load NIL
Type  Open-ended

The objective of this scheme is to generate a steady return with low to medium market risk by investing in a portfolio of short-medium term debt and money market securities.

There will be 65-100% allocation to instruments with an average maturity up to 18 months and up to 35% allocation to instruments with an average maturity greater than 18 months.

8. Principal Cash Management Fund

This is a liquid fund launched on January 1, 2013. It is a debt fund with very low risk and has given a return of 8.24% since its launch.

Returns per annum over the years from this fund are:

Principal Cash Management Fund
Fund Name 1Y 3Y 5Y Category Risk
Principal Cash Management Fund - Direct - Growth -1.77% 4.23% 6.09% Debt
(Liquid)
Low

Invest in Principal Cash Mgmt Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹1,271 Cr
Minimum SIP Not Supported
Minimum SWP ₹500
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Liquid since its launch.
Age of the fund 5 years old
Expense Ratio 0.15%
Exit Load NIL
Type  Open-ended

The scheme aims to provide income from short-term investments, consistent with preservation of capital and liquidity by investing in a portfolio of money market and in investment grade debt instruments

9. Aditya Birla Sun Life Corporate Bond Fund

This is a short-term debt fund launched on January 1, 2013. It is a debt fund with low risk and has given a return of 8.88% since its launch.

Returns per annum over the years from this fund are :

Aditya Birla Sun Life Corporate Bond Fund
Fund Name 1Y 3Y 5Y Category Risk
Aditya Birla Sun Life Corporate Bond Fund - Direct - Growth 5.57% 7.75% 8.78% Debt
(Corporate Bond)
Moderately Low

Invest in Aditya Birla Sun Life Corporate Bond Fund Now

Rating by Groww 5 star
AUM (Fund Size) ₹19,445 Cr
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.26%
Exit Load NIL
Type  Open-ended

This scheme aims to generate current income and capital appreciation from a portfolio that invests 100% in debt and money market securities.

With an asset size topping ₹19,445 crores, the fund is the most popular fund in the category. The fund usually relies more on corporate debt than sovereign debt.

10. Kotak Banking and PSU Debt Fund

This is a Short-term debt fund launched on February 3, 2014. It is a debt fund with low risk and has given a return of 8.83% since its launch.

Returns per annum over the years from this fund are:

Kotak Banking and PSU Debt Fund
Fund Name 1Y 3Y 5Y Category Risk
Kotak Banking & PSU Debt Fund - Direct - Growth 5.14% 7.67% 8.36% Debt
(Banking & PSU)
Moderately Low

Invest in Kotak Banking and PSU Debt Fund Now

Rating by Groww 4 star
AUM (Fund Size) ₹1,292 Cr
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark Crisil Short-Term Bond since its launch.
Age of the fund 5 years old
Expense Ratio 0.15%
Exit Load NIL
Type Open-ended

The objective of this scheme is to generate risk-free returns through investments in sovereign securities. The savings plan (D) will provide regular dividend payouts. A portion of the fund will be invested in inter bank money market in order to meet the liquidity requirement.

Why Choose Debt Mutual Fund for Your Lump Sum Investment?

Debt mutual funds are the best option when it comes lump sum investment. It is not advisable to go for equity mutual fund for investing lump sum amount.

Reasons:

  • Investment in debt funds is a much safer option as compared to equity oriented mutual funds.
  • Expect good, stable and sustainable returns over a period of time
  • High liquidity of debt funds, which is in comparison to equity mutual funds.
  • If you invest a large sum, in equity mutual funds, in one go, you could end up catching a high point of the equity markets. If the markets fall sharply thereafter, a substantial portion of the value of your money can get eroded in the short-term.

If you are planning to invest a lump sum amount in equity markets invest through STP. 

STP stands for Systematic Transfer Plan.

It helps you to transfer a fixed amount from a particular mutual fund scheme (usually a debt fund) to another (usually an equity oriented scheme) within the same fund house.

When you are setting up an STP, you are actually instructing the fund house to sell a part of your investment in a debt fund and invest the money in another scheme.

Read more5 Reasons Why STP is Better than Investing Lump Sum

The basic idea behind an STP is to earn a little more on the lump sum amount while it is being deployed in equity-oriented schemes.

Debt funds excel over the normal savings bank account in terms of return on your investments.

Read More: 5 Reasons Why Debt Funds Are Better Than Fixed Deposits

The biggest advantage of STP is Rupee Cost Averaging in buying funds with any equity exposure (Equity or Balanced funds) as it protects you from any shocks in the stock markets.

Since you are buying periodically, the ups and downs of the stock markets are accounted for just as in SIP.

Depending on the lump sum amount, the investors can decide the period over which they want to deploy the money via STP. Typically, the larger the amount, the longer the time period of STP.

Things to Remember

The rates of return consider above are all past data. No one can predict the actual rate of return you will get on your investment.

You can only assume and predict the fund’s capability based on its past performance and hope for the best.

But don’t just run for returns from investment for investing in mutual funds. There are a lot of factors you should look into before selecting a fund which will match your investment goals.

Following the 3 things you should always remember before investing in Mutual Funds :

  1. Don’t blindly invest in the fund with the highest returns. Invest based on the duration you want to invest for.
  2. Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  3. Review your investment from time to time but not too often. Once a few weeks is good enough.

Read More: 10 Tips on Investing in Mutual Funds

To look at some of the best performing funds from every category of mutual funds, check out Best Mutual Funds to invest in 2019

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.