If you are a mutual fund investor, then a market fall may tempt you to dive into equities. However, it is best to keep emotions at bay while taking financial decisions. Instead, base your investment decisions on your financial goals. When it comes to lump sum investment, you can use suitable asset allocation patterns and have a better chance to make your money work for you.

If you have a lump sum amount of money and you are thinking to invest in mutual funds then the below pointers can be helpful. You need to keep in mind your financial goal and investment horizon before making the decision.

Financial Goal: Large Purchases in Near Future

If you have plans to make any large purchase such as buying a house, luxury car or a family vacation, then you need to be conservative with your money. These are short term goals. If they have a time frame of fewer than three years, then you can invest a lump sum in a mix of ultra-short funds and other short-duration funds. You may also want to look at banking and PSU bond funds. If you fall under the lower income tax bracket, then you may consider investing in fixed deposits or any other small saving scheme.

Financial Goal: Medium Term

Medium-term goals can be for either 4-7 years or even 10 years. If you are sceptical of market volatility, then you might consider investing in fixed income options. If not, then you can add some equity mutual funds in your portfolio. However, you might want to take your risk appetite into account. You can switch from equity mutual funds to bonds when you inch closer to your financial goal. You can opt for an STP from equity mutual funds to liquid schemes.

Financial Goal: Long Haul

If you are planning for a long-term investment, then you can invest in mutual funds. If you want to invest a lump sum in mutual funds, then choose the systematic transfer plan method. You can also have a mix of the index and active funds. If you wish to geographically diversify your investments, then you can allocate up to 10% of your assets in international funds. If liquidity is not a priority, then you can invest in PPF (public provident fund). You can also keep 5-10 per cent of your portfolio in gold as it acts as a hedge if equities fall. If you can stomach market volatility, then you can also think of investing in mid-cap funds.

If you plan to invest your money for regular income, then there are many senior citizens saving schemes that you can choose from. This can also be your emergency fund. When it comes to SIP vs lump sum, you can take a calculated decision based on your investment horizon and financial goals. Investing a lump sum in mutual funds needs to be done after proper planning and research. The market fall should not be the only criteria for you to make a decision. To get an approximate idea about your lump sum investment, you can use a lump sum calculator. Happy investing!