SIP (Systematic Investing Plan) or Lumpsum, which option is better for investing in mutual funds? How do you decide which are the best funds to invest in.
Once you have chosen the best mutual fund to invest in, SIP & Lumpsum are the two ways to grow your investments. A SIP, considered to be a good option for investment purposes. It is convenient, flexible and inculcates a habit of investing.
In a SIP, a fixed sum of money will be deducted from your bank account and will be invested in the fund of your choice. Whereas in Lumpsum, you will need to time the markets. Of course, you need to have sound knowledge and be smart enough to make calls on investments for better gain.
Advantages of SIP & Lumpsum investment
SIP – When you start a SIP, a fixed sum of money gets deducted periodically. So when the market is down, you get more units and vice-versa. This helps in cost averaging. You don’t have to time the markets at all. It’s perfect for people who have started to invest or are completely new to investing.
Lumpsum – If you wish you invest in lumpsum, you will need to be very good at timing the markets. If the markets are low, your investment can give you more units. You will need to make a one-time investment, unlike SIP where you do it periodically.
Drawbacks of SIP & Lumpsum investment
SIP – Starting a SIP is like opening an umbrella, even if it’s raining or not. This means even when the markets are high you are still making an investment resulting in the accumulation of fewer units as compared to when investing in a low market.
Lumpsum – You will need to have very good knowledge about the markets to make the right decision to invest in lumpsum. If you invest and the markets go down, you will end up losing your wealth. Hence, good knowledge about the markets and foresight is important when you choose to invest via lumpsum.
Regardless of which investing mode, you chose, it is the selection of the best mutual fund for SIP or lumpsum that plays a crucial role. for long-term risk-adjusted returns. After selection of the best mutual fund to invest in for the long term, you can initiate a SIP or make a lumpsum investment.
Disclaimer: The article here is only for general information and reading purposes. This is not a guideline that a reader should follow.You should take action after your own research about the company in which you are going to invest. The purpose of this article is only for information and a basic guide.We all encourage everyone to invest for a better future that does not mean you have to follow the steps.
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.