Which is the better option in SIP vs one time investment in Mutual fund? If you have decided to invest in mutual funds, you must be wondering which is the best option. Both methods aim to help you in building wealth. However, to create a financially secure future, your present cannot be neglected. A balanced life is a key to success.
Choosing between SIP vs one time investment in mutual fund should be the one that will make your future without breaking your present. The deciding factor is your affordability. Read this article carefully to know which method will suit you the best.
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What is SIP in mutual fund?
SIP or Systematic Investment Plan is a method of investment in which you invest a fixed amount at regular intervals. The investor has the liberty to choose the frequency of the investment – weekly, monthly, quarterly, or annually. If anytime you don’t have sufficient money to invest, then you can pause or even terminate your SIP without incurring any penalties.
The features of investment via SIP are:
- It channelizes a consistent flow of investment.
- It can be started with a very low investment amount.
- It helps in creating capital over time with small and regular investments.
- It helps with rupee cost averaging.
- After the SIP is activated, the deduction is automatically done from the account on the selected date.
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What is one time investment in mutual fund?
In one time investment option the whole amount is invested together. There is no role for regular investments and is cleared at one time. The lump sum investment is completed by issuing a single cheque.
The features of lump sum investment are:
- The investment is done through a single cheque.
- It has a long investment horizon with long-term rewards.
- It carries high risk with anticipation of high returns.
- It helps in meeting financial goals.
What are the benefits of SIP?
The advantages of SIP over the other investment method are:
- You don’t need to closely watch and understand the changing market.
- It helps in reducing the cost per unit purchased.
- It makes you financially disciplined.
What are the benefits of one time investment?
The advantages of lump sum investment are:
- You can invest in a single time if have a large amount in hand.
- You can understand the market and invest when the market is low.
- You experience compounding benefits on the interest received for the investment.
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Comparison between SIP vs one time investment in mutual funds
Other than the way of investing, there are various aspects to compare in SIP vs one time investment in mutual funds. Many factors should be considered before selecting your investing path, which will be cleared in the table.
|Basis||SIP||One time investment|
|Mode of investment||SIP is a weekly, monthly, quarterly, or annual investment.||One time investment is a single-time investment.|
|Monitoring market||In SIP, you need to watch the market pattern but not as keenly as lump sum investment. You can invest in different market changes.||For lump sum investments, the investor needs to keep a keen eye on the market changes. They need to wait for the moment when the market is low.|
|Investing amount||SIP can be activated by investing as low as Rs 500 per investment.||Most mutual funds require Rs 5,000 in a lump sum investment.|
|Market volatility||It is not much dependent on market volatility.||It is highly based on market volatility.|
|Flexibility||It is quite flexible as you can pause, terminate, change the amount, or withdraw from the SIP.||One time investment does not have any flexibility.|
|Risk involved||The risk involved is low to moderate because of changing market.||It involves moderate to high risk but anticipates high returns.|
|Financial discipline||SIP initiates a discipline of regular saving because of regular investments.||It does not create any financial discipline because of one time investment.|
|Ideal for||SIP is a good option for small investors and beginners.||One time investment is for experienced investors who know how to read the market patterns.|
To sum up everything, small and individual investors should go for SIP, and large-scale investors should opt for one time investment in SIP vs one time investment in mutual fund. Investors who want to take high risk for high returns should invest in a lump sum. But the investors who want to play a little safe should invest through SIP. Remember, even the most experienced investors fail to understand the market sometimes. So, to make the investment you should consider your present financial status, responsibilities, goals, and commitments. Take your time and decide wisely.