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2 mins Read | 4 Years Ago

SIP vs Lumpsum Investment: Which One Is Better To Opt

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SIP vs Lumpsum Investment: Which One Is Better to Opt for?

Investing your hard-earned money is a significant step towards achieving your financial goals. With a plethora of investment options available, selecting the right one can be quite a challenge. Systematic Investment Plans (SIPs) and Lumpsum investments are two popular investment options that come to mind when considering investing.

According to a recent survey conducted by the Securities and Exchange Board of India (SEBI), the total number of Mutual Fund (MF) investors in India stands at over 1.94 crore, indicating its popularity among investors. To help you make an informed decision, we will discuss the differences between SIPs and Lumpsum investments and which is better for you. So, let us begin!

Understanding SIP Investment

An SIP is a mode of investment in mutual fund that allows investors to invest small, fixed amount of money regularly, either monthly or quarterly. The primary advantage of investing through an SIP is that it enables investors to average out the purchase price of Mutual Fund units over an extended period, reducing the risk of investing at a high price. It is considered as a disciplined approach, as investors regularly invest over the long-term.

Understanding Lumpsum Investment

Lumpsum investment, on the other hand, is when an investor invests a significant amount of money in a Mutual Fund scheme in a single go. The advantage of investing through Lumpsum is that it provides the potential for higher returns in the short term if the market is on an upward trend. However, it comes with a higher risk, as the investor invests a significant amount in one go, Using a Lumpsum Calculator one can easily calculate the estimated return on their investment.

SIP vs Lumpsum Investments: What is the Difference?

The primary difference between SIP and Lumpsum investments lies in the investment mode. SIP investment allows you to invest a fixed amount of money at regular intervals, say monthly, quarterly or annually. On the other hand, a Lumpsum investment requires you to invest a Lumpsum amount in a Mutual Fund scheme in one go.

Both SIP and Lumpsum investments have their pros and cons and choosing between the two depends on various factors.

Major differences between SIP and Lumpsum investments -

Factors

SIP

Lumpsum

Investment Amount

Fixed amount at regular intervals

Large amount in one go

Investment Goal

Long-term goals

Short-term goals

Risk Appetite

Low-risk

High-risk

Market Conditions

Good for volatile market conditions

Good for bullish market conditions

Cost Averaging

Yes

No

Timing the Market

No

Yes

Flexibility

More flexible

Less flexible

Returns

Moderately high over the long-term

Moderately high over the short-term

Overall Risk

Lower

Higher

Investment Horizon

Long-term

Short-term

Final Words

SIP and Lumpsum investments have their advantages and disadvantages. Investors who prefer small, regular investments and are risk-averse can benefit from SIP investments. This investment strategy allows for the cost-averaging effect, which reduces the impact of market volatility on investments. Lumpsum investments can be advantageous for investors with a large sum of money and want to invest it at once.

If you are interested in investing in Mutual Funds through SIP or Lumpsum, then ICICI Bank can be an excellent choice. Being a leading (Association of Mutual Funds in India) AMFI - Registered Mutual Fund Distributor, we offer benefits such as low investment barriers, minimal documentation, flexible payment options and an easy application process. With our seamlessly operational iMobile Pay app, investing in Mutual Funds has never been easier!

Speak to one of our investment advisors or visit our website to learn more about our investment products and services and start investing with ICICI Bank today!

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