Investing in mutual funds has become increasingly popular in recent years, mainly because of how accessible it has become. In India, people have become more aware of the investment options available to them, and mutual funds are often their go-to investment option. However, most people still debate which investment option is the right one for them – mutual fund SIP or lump sum investment.
Systematic Investment Plan (SIP) and lump sum investment are two ways to invest in mutual funds. The former is a method that involves investing a fixed amount regularly, usually monthly, while the latter requires investing a lump sum amount in one go. Depending on the investor’s financial situation and investment goals, both options can be beneficial. Let’s take a closer look at the two investment options and see which is better.
Mutual Fund SIPs
Mutual fund SIPs are a popular investment option, especially for those who cannot invest a large sum in a single go. SIPs are an attractive option for several reasons. Firstly, it encourages disciplined financial planning and investing. Fixed amounts are invested regularly, usually every month. It means that people automatically invest a portion of their income each month. Moreover, since the amounts invested are smaller, the investor doesn’t feel the pinch of a considerable investment right away.
Secondly, SIPs are one of the best ways for beginners to enter the world of investing, as they allow for consistent investment without putting unnecessary pressure on your finances or requiring a substantial amount of knowledge. SIPs offer benefits such as rupee cost averaging, which ensures that the investor buys more mutual fund units when the price is low, and less when the price is high.
Thirdly, SIPs offer compounding benefits. The returns on mutual funds are reinvested and generate additional returns over the long term. Over time, the power of compounding can be significant, as the returns earned on the fund’s returns can snowball into significant amounts. This can make your investment work harder for you over time.
Finally, SIPs also help investors diversify their risk by investing in different funds. Spreading the investment across several mutual funds can help mitigate the risk associated with investing in a single fund, such as the risk of loss if the fund underperforms.
Lump Sum Investments
Lump sum investments allow investors to invest a significant amount of money in mutual funds all at once. This method is best suited for individuals who have a lump sum amount available to invest, such as a bonus or inheritance. When compared to SIPs, lump sum investments offer several benefits.
Firstly, lump sum investments provide instant investment benefits. The investor can invest in the mutual fund of their choice and earn returns immediately. Secondly, unlike a mutual fund SIP, lump sum investments have no recurring fees like charges, management fees, and other related expenses.
Thirdly, they offer an option for immediate returns on capital. This means that they allow investors to reap the benefits of the funds they’ve invested in, including capital appreciation, dividends, and more. Fourthly, lump sum investments are an excellent way to take advantage of high market volatility and take big bets on the market.
Which is Better for Investors Mutual Fund SIPs or Lump Sum Investments?
The question of whether mutual fund SIPs or lump sum investments are the better investment option depends on an individual’s needs at the time of investment. In most cases, SIPs are a better option for longer-term investing goals, especially for beginners or those with a low appetite for risk. In contrast, lump sum investments may be more appropriate for those with a higher risk appetite and more significant capital to invest.
Moreover, it’s important to note that both options have their pros and cons. With SIPs, investors have the advantage of rupee cost averaging and compound interest. In contrast, lump sum investments offer the opportunity for higher returns and instant access to funds. In the end, the answer lies in your financial situation, investment goals, and risk tolerance.
Investing Through a Mutual Fund Mobile App
Investing in mutual funds is simple with the help of a mutual fund mobile app. With the help of a mutual fund mobile app, investors can access a range of mutual fund options, view their portfolios, track their investments, and much more, all at their fingertips. For example, the Bajaj Finserv app offers several features to make mutual fund investing easy and accessible.
With the Bajaj Finserv app, investors can access 4000+ mutual funds, both SIP and lump sum investments, and pick from a range of portfolios based on their investment goals, risk tolerance, and return expectations. Additionally, the app offers a range of features, such as robust research tools, real-time monitoring and analysis, and smart goal tracking that make investing in mutual funds accessible, convenient, and simple.
Investing in mutual funds is an excellent way for investors to grow their wealth over time, and mutual fund SIPs and lump sum investments are two options available to them. Both options have their pros and cons, and the choice depends on an individual’s needs, financial goals, and risk tolerance.