SIP or lump sum: Which is the best way to invest in mutual funds?
Mutual fund investments have become an effective way of creating wealth. However, the decision to choose between SIPs and lump sum often confuses investors
image for illustrative purpose
Mutual funds, in present times, have become a great way to invest and grow your financial wealth. When you invest in a mutual fund, you have a choice between the two: SIP and lump sum.
If we talk about the lump sum mutual fund, it entails the sum of money investors want to invest in a plan. On the other hand, systematic investment plans (SIP) involve making regular and periodic investments in mutual funds. However, investors often need clarification on the two. So, before making any decision, one must consider the factors given below.
Factors to consider before making an investment decision
The amount you want to invest: The availability of investable money is crucial when making a lump sum or SIP investment. This is where, if you have a considerable amount at your disposal, a lump sum investment can be a great choice. But when you have a limited amount in your hands, then SIP mutual fund is best for you.
The timing of the market: Before investing, one must consider the market timing. When the market is low, the return you get from the lump sum can be good. But, when considering SIP investment, you don’t have to focus on that. For example, when seeking long-term NIFTY50 data, investors have witnessed differences in performance.
The fund type you prefer: Undeniably, market volatility certainly impacts the return on specific funds. Hence, before investing, you must consider the funds, such as equity, debt, or hybrid funds.
Selecting the investment avenues between SIP and lump sum depends on your short- and long-term goals. So, your call should be based on your preference, not others!
