Friday, February 23rd, 2024

Mutual Fund: lumpsum or SIP, what is the best way to invest? Know the advantages and disadvantages


Photo:INDIA TV lumpsum or SIP, what is the best way to invest?

Mutual Fund is the best way to invest without being active in the stock market. There are mainly two ways to invest in this. First- SIP and second- Lumpsum. In SIP you have to invest a fixed amount every month like installment. Whereas in lump sum, all the capital has to be invested at one time. Both these methods of investment have their own advantages and disadvantages.

Advantages and disadvantages of doing SIP in Mutual Fund

  • The biggest advantage of doing SIP is that investing every month inculcates financial discipline in you.
  • You can start investing even with a very small amount like Rs 100.
  • The advantage of SIP is that you invest through all the ups and downs of the market. Due to this your investment keeps getting averaged and with this you can make good money in the long run.
  • You can increase SIP as your income increases. This helps you to get good returns.
  • The disadvantage of SIP is that you are not able to take advantage of any major fall in the market.
  • If you forget any SIP installment then you have to pay a penalty.

Advantages and disadvantages of investing lump sum in Mutual Funds

  • The advantage of investing lump sum in mutual funds is that you can take advantage of market fluctuations.
  • Lumpsum investment involves investing together. With this you are saved from any kind of fine etc.
  • The disadvantage of lumpsum investing is that it does not develop financial discipline. In such situations, many times big opportunities are missed by investors.
  • Lumpsum investing requires very in-depth knowledge of the market. Even your smallest mistake can convert into loss.

lumpsum or SIP: what is best?

If you have good knowledge of the market and have a large capital, then it can be good to invest lump sum. At the same time, if you are new and have less capital then SIP is best.

(Note: This report has been prepared on the basis of general information. Before taking any investment decision, please consult your financial advisor.)

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