Money-Wise | SIP or lumpsum: What is a better mutual fund investment?
Representational image of mutual funds.
Mutual funds have emerged as one of the favourite investment options for investors in today's time.However, what is the right way to invest money in mutual funds has left many investors confused.
For investors, it is important to make the right investment decision on mutual funds to secure their financial future and ensure the best returns from the investment
How can investors invest in mutual funds?
The investors have two ways to invest in mutual funds.One way is to make a "Lumpsum" investment and the other is to go for a "Systematic Investment Planor SIP" in which a fixed amount is invested in the fund at specific intervals.
In lumpsum investments, the investors can purchase the number of units they wish in one move. This investment helps in creating extra wealth and liquidity. The timing of the investment is the key strategy in the lumpsummethod.
In the Systematic Investment Plans(SIPs), the investor is able to invest a specific amount in the funds at regular intervals. This amount is generally deducted from the bank account of the investor.
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So what is a more advantageous mutual fund investment: lumpsum or SIP?
Lumpsum vs SIP: Who's the winner?
Hence, both lump sum and SIP have their advantages as well as disadvantages.
An investor should make choices on the basis of their financial goals, their ability to invest in the market and their appetite for taking risks.
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For example, SIP will be a good option for an investor who does not have a lumpsum amount but can afford to invest a small part of his/her salary every month.
However, if there is an investor with lying cash and has a good understanding of the market, he/she can go for the lumpsum investment because it is a high-risk investment.