Introduction
As far as SIP vs lumpsum is concerned, we can say that both are better in their own ways. Apart from which schemes to invest in, it’s also important to know how to invest in mutual funds. If an investor wants to make a one-time investment in mutual funds then they can do it through lumpsum investment or they can even choose to spread it out over a period of time through SIP.
SIP vs Lumpsum
A systematic investment plan or SIP is a facility that is offered by mutual funds to its investors to invest in a disciplined and systematic manner. It enables investors to invest money in a selected mutual fund scheme at pre-defined intervals. The money can be as low as Rs. 500 and the predefined intervals can be on the basis of weekly/monthly/annually/quarterly etc. When an investor invests in SIP, he does it in a time-bound manner and thus definitely benefits in the long run.
Lumpsum investment, on the other hand, means that a person is investing a single, bulk amount locked in a one-time mutual fund investment. Lump sum investments are basically for people who are willing to invest in a sizable investment amount having a high-risk capacity. For example, we get an unexpectedly large bonus one year and after investing the amount everywhere we could we still have a certain amount left with us. We can then decide to take a risk and invest that full amount in a single mutual fund scheme because we had that amount in excess. That is basically known as Lumpsum investment.
The primary difference when it comes to SIP vs Lumpsum investment is the frequency of investment. SIPs allow us to invest money into a mutual fund periodically while Lumpsum investments are one-time bulk investments. The minimum amount that can be invested in SIPs is Rs. 500 while the minimum amount that needs to be invested in Lumpsum investments is Rs. 1000. For investors who have a small but regular amount of money for investment, SIP is a suitable option but for investors with a high investment amount as well as risk tolerance, lumpsum investments are more preferable.
Conclusion
Thus when it comes to choosing SIP vs lumpsum investments should completely depend upon one’s personal requirements. Factors such as income, financial stability, investment goals, etc need to be kept in mind while investing money in either SIP or lumpsum investments. Either way, anyone form of investment is always better than none.
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
