February 17, 2020

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SIP Vs. Lump sum – Which is the Best way to Invest in Mutual Fund?

SIP Vs. Lumpsum – Which is the Best way to Invest in Mutual Fund?

SIP Vs. Lumpsum – Which is the Best way to Invest in Mutual Fund?

Whether i should go for SIP (Systematic Investment Plan) or Lump sum for my investment in mutual fund? Which is better? Which one wi give higher return to me? It is most common questions that can arise in any investor’s mind when he/she decide to invest in mutual fund.

SIP was first introduced by Franklin Templeton Mutual Fund more than 16 years ago. Main focus was to simply buy mutual funds units every month with fixed amount. Whenever market is on ower side, you will get higher number of units and if makets is on higher side, then you will get less units. In longer period of time, if you will continue investing like this then it will average out your buying price and more over you will invest in disciplined manner.

Now we will try to cover main points.

  1. The Cash Flow – SIP vs. Lump sum
    Whether you opt for SIP route or lump sum investment, it all depend on your hand. If you are salaried and getting regular income every month then SIP is best choice for you. Investing lump sum amount is like timing the markets means you are try to invest in market at point where you think it is lowest point of market. You might be lucky, if are able to find low of market but it is not a right approach to start investing in mutual funds.

Key Point: SIP is suitable for people who have regular monthly income

2.Which one will give Higher Returns?

There is no concrete answer of this question. If we think someone have lumpsum amount then there is two choices should i start SIP or i invest in one go? To answer this question, we have to understand how market works? How it behaved in past? What kind of ups and downs that it will see in future and what it had seen in past. If you see our makets from 1991 till now. We have seen so many scams…so many news flow very day that creates volatiity in markets….if we analyze properly then we will get out answer….we can not time market….mean we never know in which phase maket is running right now. So how we can put our hard earned money by doing one time or say lumpsum investment. Best way to opt for SIP. In longer run, SIP provides much higher and safer return to you compare to one time investment.

Key Point : SIP gives better return in longer run. In lumpsum investment, at the time of investment you don’t know which phase of market you are in.

3.How to start investing ?

If you are doing job and you are getting regular pay check every month, then you should go for SIP with fixed amount that matches with your overall lifestyle.
If any cash that comes to you inform of bonus or proceeds from existing investment or gift, you can invest in SIP or lump sum. If you are doing regular SIP, you should make occasional Lump sum investments in months/periods when there is huge downfall in market

In my view, there is no definite answer which one is best ? SIP vs. Lump sum but you can mix both of them and do investing for better future.