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Sip Vs Lumpsum: Which Investment Method To Choose?

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Investing comes with choices. Apart from which schemes to invest in, one can also choose how invest in mutual funds.

An investor can make a one-time investment in mutual funds via a lumpsum investment or can choose to spread it out over a period of time through a systematic investment plan (SIP).

The mode of investment can make a difference in one’s investment portfolio. To know how, here’s a primer on both investment routes.

Understanding SIP vs Lumpsum

Both SIP and lump-sum investments allow investors to benefit from potential wealth creation through mutual funds. However, the primary difference between SIP and lumpsum methods is the frequency of investment.

SIPs allow you to pump in money into a mutual fund scheme periodically, such as daily, weekly, monthly, quarterly or half-yearly etc. On the other hand, lump-sum investments are a one-time bulk investment in a particular scheme. The minimum investment amount also varies. You can begin investing in SIPs with as little as Rs.500 per month while generally lump-sum investments need at least Rs.1,000.

If you are an investor with a small but regular amount of money available for investment, SIPs can be a more suitable investment option. For investors with a relatively high investment amount and risk tolerance, lump-sum investments may be more beneficial.

Comparison of the two methods – SIP vs Lumpsum

Most investors prefer periodic investments because of the benefits SIPs offer over lump-sum investments. Some of these are outlined below:

1. Investors don’t have to monitor the market closely

Since lump-sum investments are a bulk commitment, investors need to know when they are entering the market. Lump-sum investments are most beneficial when you invest during a market low. However, with SIPs, you have the chance to enter during different market cycles. Investors do not have to watch market movements as closely as they would for lump-sum investments.

2. Lower investment requirement

As mentioned above, you can begin investing in SIPs with as little as Rs. 500 per month  On the other hand, lump-sum investments need at least Rs.1,000, although most mutual funds in India set the lower limit at Rs.5,000. Investors can use SIP calculator to calculate and estimate the returns on their SIP investment.

3. Averaged costs

As SIP leads to mutual fund purchases during different market cycles, the cost per unit is averaged out over the overall investment horizon. More number of units are purchased during a market low, compensating for purchases made during a market high. This can help tide over market fluctuations and even out the cost. Units can then be sold when the market is performing well.

4. Power of Compounding

The interest earned on SIP investments are reinvested in the scheme. Here, the compounding effect helps generate greater returns.

5. Inculcates financial discipline

SIPs can get you into the habit of saving frequently. Banks allow you to set up an automatic investment instruction at a frequency of your choice.

During Times of Market Lows

For investors who can recognize market cycles, identifying a market low and investing a lumpsum amount in a mutual fund at the right time can garner high returns. This is because of the basic principle of investing – buying low and selling high.

However, an ill-timed investment could result in losses and lost confidence. This is because an investor whose lumpsum is making losses may hesitate to pump in money again. Seasoned investors with ample market knowledge can benefit from lumpsum investments. Some of the other benefits of lumpsum investments are:

  • It can give considerable returns for those with a long-term investment horizon (seven to 10 years minimum).
  • It can help achieve specific financial goals like investing for a child’s education fund or for a retirement fund.
  • It requires a one-time payment only.

Factors to Consider Before Investing

When trying to decide the right investment route, consider the following factors:

1. Amount

If you have a bulk amount at your disposal, a lumpsum investment may be a good way to go so that you do not end up spending the money. On the other hand, for a salaried person trying to inculcate a savings habit, SIP would be more suited.

2. Market Timing

During a market low, lumpsum investment will generate higher returns. If you are unable to identify cycles, a SIP will help distribute the risk.

3. Fund Type

For equity funds, as mentioned above, market volatility plays a huge factor in returns. Debt funds are less affected by market trends and are likely to give you similar returns for lumpsum and SIP investments.

Bottomline

Choosing a SIP over a lump-sum investment should be based on your personal requirements. Factors such as income, financial stability, investment goals, and risk capacity must determine the route of investment.

That said, experts believe that SIPs are superior on two counts: they can help you tide over market fluctuations and be a good investment option even for novice investors since they do not necessitate frequent monitoring of financial markets.

Either way, some form of investment is better than none.

म्यूच्युअल फ़ंड्स के निवेशक अक्सर दुविधा में रहते हैं कि म्यूच्युअल फ़ंड्स में निवेश करने का कौन सा तरीका बेहतर है-एकमुश्त भुगतान या सिस्टेमैटिक इंवेस्टमेन्ट प्लान्स, जिन्हें एसआईपी के नाम से जाना जाता है. एसआईपी में निवेशक के पास नियमित अंतराल पर एक निश्‍चित रकम निवेश करने का विकल्प है. इससे यूनिट्स की लागत के औसतीकरण का लाभ भी मिलता है और कंपाउन्डिंग का भी. हालांकि, ऐसी स्थितियां भी हो सकती हैं, जब आप एकमुश्त रकम का निवेश करना चाहें. यह वीडियो आपको इन दोनों रणनीतियों को बेहतर तरीके से समझने में मदद करेगा.

મ્યુચ્યુઅલ ફંડ્સ રોકાણકારો હંમેશા એ મૂંઝવણ અનુભવે છે કે મ્યુચ્યુઅલ ફંડ્સમાં રોકાણ કરવાની કઈ રીત શ્રેષ્ઠ છે, લમ્પસમ કે પછી સિસ્ટમેટિક ઈન્વેસ્ટમેંટ પ્લાન જે એસઆઈપી તરીકે પણ ઓળખાય છે. એસઆઈપી રોકાણકારને નિયમિત અંતરાળે નિશ્ર્ચિત રકમનું રોકાણ કરવાની તક આપે છે. એટલું જ નહીં, તે ચક્રવૃદ્ધિનો લાભ પૂરો પાડવા ઉપરાંત યુનિટના ખર્ચને સરેરાશ કરવાનો લાભ પણ પૂરો પાડે છે. જોકે, એવી પરિસ્થિતિઓ પણ હોઈ શકે છે જ્યારે તમે લમ્પસમમાં રોકાણ કરવાનું પસંદ કરી શકો છો. આ ટૂંકો વીડિયો તમને આ બંને નીતિઓને સારી રીતે સમજવામાં સહાયક બનશે.

মিউচুয়াল ফান্ডে বিনিয়োগকারীরা মিউচুয়াল ফান্ডে বিনিয়োগের জন্য কোনটা ভালো উপায় হবে তা নিয়ে প্রায়শই একটি উভয়সঙ্কটে পড়েন - এক থোকে না এসআইপি নামে পরিচিত সিস্টেমেটিক ইনভেস্টমেন্ট প্ল্যানে| একটি এসআইপি একজন বিনিয়োগকারীকে নিয়মিত ব্যবধানে একটি নির্দিষ্ট রাশি বিনিয়োগ করায়| ইউনিটের গড় ব্যয়ের সুবিধার সাথে এটি দেয় কম্পাডিংয়ের সুবিধাও| যদিও, কোনও কোনও পরিস্থিতিতে আপনি এক থোকে বিনিয়োগ করতেও পছন্দ করেন| দুটি কৌশলকেই আরও ভালো করে ৱুঝতে সাহায্য করবে এই ছোট ভিডিওটি|

மியூச்சுவல் ஃபண்ட்களின் முதலீட்டாளர்கள் பெரும்பாலும் மியூச்சுவல் ஃபண்ட்களில் முதலீடு செய்யும் நிலையில், அவற்றில் எது சிறந்தது என்று சிந்தித்து குழப்பமடைகின்றனர். எஸ்ஐபி என்பது ஒரு முதலீட்டாளர், குறிப்பிட்ட கால இடைவெளியில் ஒரு நிலையான தொகையை முதலீடு செய்வதாகும். மேலும் காம்பவுண்டிங் எனப்படும் கூட்டு திறன் சக்தியின் நன்மைகளை அளிப்பதோடு யூனிட்களின் விலைகளை சராசரிப்படுத்தும் நன்மையையும் இது தருகிறது. ஆனால் சில நேரங்களில் நீங்கள் மொத்தமாக ஒரு தொகையை முதலீடு செய்ய விரும்பலாம். இந்த இரண்டையும் பற்றி நன்கு புரிந்து கொள்ள இந்த சிறிய வீடியோ உங்களுக்கு உதவும்