SIP VS LUMP SUM

Mutual Fund investments are extremely popular nowadays. If you are at a young age then this is the right time to invest. But how to invest in mutual funds? There are two payment methods available to invest. Yes… You can invest in either SIP or LUMP SUM. But which one is the best option to invest? What are the benefits of these payment methods?

SIP

Systematic Investment Plan (SIP) is available to invest a fixed amount at regular intervals for a fixed duration. This payment method is the best choice for one who has a small budget to invest. For example most of the mutual funds offer Rs.500 is the minimum SIP amount.

LUMP SUM

Lumpsum investment is called One time investment. If you have a huge amount to invest, then you can pick this payment method. For example you are ready to invest Rs.100000, then choose the best fund to invest the amount in single payment.

Benefits of SIP

1.Financial Discipline :

You can learn financial discipline while you choose SIP payment. Because every month we should keep aside a particular amount to invest. If you do so for the long run, this habit influences your life & helps you to learn financial discipline.

2.Low investment :

In Mutual Funds, most of the schemes offer low initial investment as Rs.500.This will be an affordable cost for any monthly salary employees. You can increase your monthly SIP amount every year.

3.Power of Compounding :

When you invest through SIP continuously for a long period of time, by the concept of Power of Compounding, your investment grows substantially year by year. This will help you to get high returns at the end as much as possible.

4.Rupee Cost Averaging :

By this concept, you can purchase more no. of units when the market is down & less when the market is rise up. This will result when the market is volatile, your investments will be safe.

Benefits of LUMP SUM

1.Power of Compounding :

It is the common factor for both SIP & Lump sum. The amount you invested will grow substantially when you hold it for a long period of time.

2.Investment of Big Amount :

By this mode of payment, Individuals can invest huge amounts at a time. So that when the market rises, your investments also increase at maximum level as compared with SIP.

3.High Returns :

If you prefer to hold your investments for a long time, then the Lump sum payment method is more suitable. You can get the returns higher than the SIP.

4.Minimum charges :

Lump sum investments have lower maintenance cost & transaction cost. But in the SIP has exit load with taxation liabilities which is not present in Lump sum investments.

Difference between SIP vs LUMP SUM

Conclusion

However you choose either SIP or Lump sum before that you should consider your investment goals, income, age, risk factor & investment tenure. By analyzing these factors then you can choose your mode of payment.

Invest wisely… Get Rich Quickly