If you are thinking about investing in a Mutual Fund but are confused about SIP(Systematic Investment Plan) or Lump Sum ,then today’s writing is for you. One has a risk of losing money due to a wrong investment.You can understand by reading this writing when you should invest in SIP and when it is more profitable for you to invest in Lump Sum.

By reading this blog, you’ll understand when SIP is beneficial for you and when a lump sum investment might be more profitable.

Lump Sum Investment

Lump Sum investment means You investing huge amount of money in Mutual Fund.Suppose You have 1 lakh rupees and you want to invest it in Mutual Fund–this is called Lump Sum investment.In this way you can invest the full amount,as a result you can loss or gain depends on market fluctuations.

SIP (Systematic Investment Plan)

SIP is a type of investment in which you can invest your money in small amount at a regular intervals.Suppose you are investing your money in monthly installment or three months interval installment in Mutual Fund –this is called SIP.It is a regular and long term investment method ,where you can invest your money at a regular intervals according to market fluctuations.

But if you want to know more about what mutual funds is, then check my this post:
How to Invest in Mutual Funds in India (2024)

Key Differences

• Lump Sum investment: It is one time investment method, where you can invest your whole money in one time. Here it is very important to market analysis and time, because,if you invest in low market then their is a chance of gaining high profit. But, if the market is down then you may face losses.
• SIP is a method of investing of fixed money in a regular intervals. Here the risk is low in comparison because you are investing your money according to market fluctuations.There are no obligation of investing whole money and you can invest step by step.

However, with a lump sum, this flexibility isn’t available because you make a one-time investment. If the market declines in the future, there’s a significant chance of loss.

Understanding the Market

Mutual Fund and Share markets never stay still;it fluctuates over time.If you invest at a price this month,that can be increase or decreased in the next month. For these reason, investment is more risky in Lump Sum investment, because you invest your whole money at one time. You can face a huge loss if the market is down.

On the other hand,investing through SIP reduces the risk of market fluctuations.You can invest in any market situation and get an average profit in long term investment.You can buy unit when the market is down and sell it when the market price is increase which give you a profit.

Advantages of SIP

1. Reduction of risk: If you invest in high market due to marker fluctuations,you can buy units in low price in next month if the market is down, which helps you to gain profit in the future.
2. Invest in small quantities: If you can’t invest a large sum of money then you can began to invest in small amount through SIP.It is very helpful for new investors.
3. Capital growth in the long term: It is possible to gain an average profit by ignoring the market fluctuations if you invest through SIP.

Which method is right for you?

If you are an expert investor and understand the market fluctuations, then you Lump Sum is appropriate for you. But if you are a new investor and want to decrease the risk then SIP is your best choice. It can give a chance of getting profit by investing step by step.

Conclusion

If you analysis market situation in 2024,then SIP is better for you.On the other hand,If you are capable to invest a large amount of money in downward market then Lump Sum investment is also profitable for you.But,SIP is the safest and easy way for new investor.

If you want to know about the process of using Groww app then read my next post which I will reveal next week.