Everyone does SIP but the benefits here are more, there is no hassle of investing money every month

This method of investing in mutual funds is a lump sum. In this, you put a lump sum amount in the fund and then let it grow. Many people ...Read more

Nowadays you will find advertisements about SIP in newspapers, TV and digital media as well as other platforms. SIP means Systematic Investment Planning. You deposit a fixed amount at fixed intervals for a long time and with the help of compounding your deposit amount gets converted into a big fund. But apart from SIP, there is another way to invest in mutual funds which people know but very little is discussed.

This method of investing in mutual funds is a lump sum. In this, you put a lump sum amount in the fund and then let it grow. Many people are confused about which of these two methods is better for investing in mutual funds. Today, by comparing these two on some points, we will tell you which option is better for you.

Which state received the highest foreign investment ahead...

SIP (Systematic Investment Plan)Lumpsum (Lump sum investment)

A method of investing in mutual funds where you invest a fixed amount at regular intervals (weekly, monthly, quarterly, yearly).

A method of investing in mutual funds in which you invest the entire amount in one go.

You can start SIP with a small amount, like ₹100. In this, you have to invest a large amount, like ₹ 1,000, at one time.

With regular investment, you get the benefit of cost averaging. If the market is up, you get fewer units and if the market is down, you get more units. There is no benefit of cost averaging in this. You invest only once and get units as per the NAV. There is a risk of market timing.

With SIP, you invest in different market cycles, thus there is no need to time the market. To get maximum profits, you must know the market conditions and invest at the right time.

Who is ahead in terms of returns?

If you invest the same amount for the same period in any mutual fund from these 2 options which gives the same returns, then Lumpsum wins. The simple reason behind this is that in Lumpsum, you start getting the same returns on a large amount from the very first day, which you might start getting in SIP after a few years.

Example

SIP: Monthly investment- Rs 5000, Expected return- 12%, Time- 10 years.

In this way, your total deposit amount is Rs 6 lakh. In 10 years, you will get a total return of Rs 5,61,700 on this. Your total fund after combining the deposit amount and return is Rs 11,61,700.

Which state received the highest foreign investment ahead...

Lumpsum: Lumpsum investment- Rs 6 lakh, Expected return- 12%, Time- 10 years.

In this method, your lump sum deposit remained the same as you had deposited in SIP in a span of 10 years. But here the return was being received on Rs 6 lakh from the first day, so the expected return for 10 years would be Rs 12,63,500. That is, the total value of your investment and return combined became Rs 18,63,500. You got a profit of Rs 7 lakh in lump sum.

PC:News18