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SIP vs Lumpsum Investment

When we plan on investing in mutual funds whether it is equity fund or debt fund, then there are two ways of investing in them. Systematic Investment Plan (SIP) or lump sum investments are the two ways.

If you choose SIP, then a certain amount is debited automatically from your savings account every month. However, if you choose the lump sum method, you can invest your money by paying the one-time amount toward your investment.

Investing through SIPs

A systematic investment plan (SIP) can be used to invest in all kinds of funds such as equity or debt funds. But as this facility is offered by fund houses, there may be a few funds where the SIP may not be available.

SIP is a good investment option for salaried individuals. People usually set the date for SIPs at the beginning of the month right after their salary comes into their account. This is because if the SIP date is at the end of the month there might not be enough money in the account to be debited. SIPs are debited from the account automatically on the date that the investor decides.

You don’t need a lot of money to set up a SIP. You can start investing through SIPs with just Rs.500 per month.

Rupee cost averaging is a main benefit of SIP. It gives the benefits of both falling and rising market. When the markets are down, you are allotted more units and the situation is vice versa when the markets are in green. As you are allotted more units during a market fall, then the units can grow higher when the market rises again.

Investing Lumpsum

Lumpsum means investing a larger amount at one go. The minimum lump sum investment of most funds start at Rs. 5,000. Lumpsum can help you to supplement your SIP investments. You can invest lumpsum when you get a bonus at work or when a fixed deposit matures.

Features and Benefits of SIP

It is a disciplined way of investing as a certain sum of money is auto-debited from your savings account irrespective of the market conditions.

SIPs offer the benefit of rupee cost averaging.

SIPs is easy on the pocket as SIPs start with just Rs. 500 per month.

With SIPs, you don’t need to time the market.

It helps to fulfil your different financial goals.

Benefits of lumpsum investment

As investors large sums through one-time investment, when the markets go up, the investments will also rise higher.

It is convenient for investors who have a large sum at hand and want to stay invested for the long run.

To conclude, it is a very smart choice to invest in various types of funds but the way in which you do it depends on you. Whatever your way to invest is, you should focus on achieving your financial goals.


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5 Common SIP Myths

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