Lumpsum vs SIP: Which is better?
Are you looking for ways to start your investment journey? Are you confused between the lumpsum vs SIP investment route? Maybe mutual funds can be the right way of starting but which one you should choose?
Don’t worry, we’re here to help you!
Let’s get to know about Lumpsum and SIP: which is better and when to choose?
Investing in a mutual fund as lumpsum refers to investing a big sum of money to get locked up into a one-time investment.
This is a one-time investment rather than spreading it out over time, like in SIP (Systematic Investment Plans).
Lumpsum investments are usually preferred by big players or investors who are actually dependent on company stocks for capital creation.
For an investor with a massive funding quantity and a high-chance capacity, a lump sum mutual fund funding may be an amazing opportunity.
Suppose you get the whopping bonus at the end of the year and after settling all the expenses, you still have around Rs. 50,000 – 75,000 left!
In this scenario, you can invest the money as a lump sum investment wisely as a lumpsum order in a fund of your choice.
Benefits of lumpsum
- With the lumpsum investment method, people can invest a large amount in one go. As a result, when the market shows a growth period, then the value which you have invested also increases.
- Lumpsum investments are great for those who wanted to invest for the long term and have a bulk amount ready.
- Lumpsum investments are great for the long term. If you are interested in a time horizon of nearly 10 years or more.
- Investing in a long-term investment can be risky but still, it gives better returns.
- While investing in long-term investment, gives the money more time to grow potentially.
When to choose lumpsum investment?
If you have got a whopping bonus and after settling your expenses you can opt for lumpsum investment.
If you are a freelancer and you’ve got a big amount after completing a big project then you can opt for a lumpsum investment.
A Systematic Investment Plan (SIP), popularly called SIP, is a facility provided with the aid of using mutual funds range to the buyers to spend money in a disciplined way.
SIP scheme allows investors to invest money at defined intervals in a selected mutual fund.
The starting Investment can be as low as Rs 500 and the defined interval can be weekly/monthly/yearly. It’s convenient as you can give instructions to debit the price every month.
SIP has been gaining a reputation amongst Indian Mutual Fund investors because it enables them in making an investment in a disciplined way without annoying marketplace volatility and timing of marketplace.
Systematic Investment Plans presented by Mutual Funds are effortlessly an excellent manner to go into the arena of investments.
Benefits of SIP
With SIP, you can even invest as low as Rs 500 each month and let it grow. SIP is super easy, easy to track, and also lets you save more.
- The best feature of SIP is rupee cost averaging, where you can buy more, when the market is not at a peak point and buy less when the market is at a peak point.
- This is because of the built-in feature of SIP, where whenever the market is low, you can buy more which reduces your cost and gains more.
- SIP provides amazing flexibility. Long-term investments are not that flexible. You can withdraw whenever you want to at your convenience. You can either withdraw the whole amount or half of it.
- As compared to other investments, SIP provides you with better and higher returns.
- SIP operates at the percept of receiving compound interest on your investments. In different words, a small quantity invested for the long term collects higher returns than a one-time investment.
When to choose a SIP?
If you are a person who earns every month or you are a salaried person then it can be suitable for you that you can save and invest every month.
Or, if you earn very little then you don’t need to wait for a big sum of money, you can just start investing a little amount every month.
If you can’t opt for long-term investment or can’t invest a large sum of money then you can definitely go for SIP to start your investing journey.
SIP vs Lumpsum
Now that you know what is the lump sum vs SIP investment route, it’s time to analyze which is better for you.
Investment as lumpsum or SIP has its own set of benefits and advantages. It’s hard to choose just one because both are good ways of investing.
The biggest difference between the two depends on how you are investing. In lumpsum, you need to invest in one go while in SIP, you can invest monthly.
Many investors choose SIP as it’s more convenient and more flexible. It is also a good choice for small investors who are just starting off and do not have a huge income.
As a SIP investor, you can start saving with as little as Rs. 100 with certain mutual funds.
You can never say that SIP is better than lumpsum or vice versa. There will be something in both of them which will be better than the others. An investor can never choose only one.
Both have similar benefits and differences. That’s the reason why it’s important to start investing early so that you can learn while investing in your journey.
It’s advised you to choose one which is better for you and suitable for you.