SIP Mutual Fund vs Lumpsum: Which Investment is Better to Accumulate High Returns?

Investment is the best financial decision you can make to earn the highest returns. Investment could be in the form of anything like an investment in real estate, earning returns from fixed deposits, mutual funds or the share market. But many people opt for SIP, that is, a systematic investment plan. By investing in a SIP mutual fund with an outstanding strategy, you can accumulate a great amount of returns in the next five years. Still, many get confused about either investing in SIP or just a lumpsum investment. Let’s try to find out which investment is the best, and what are the advantages and disadvantages.

As an investor, one must study what changes are happening in the market and adding to this, if one wants to invest a high amount of money for better returns, then the person is willing to take a significant risk related to the investment. If you are earning Rs. 25,000 a month, then you should think about how much percentage from the salary is best to invest in a good return.

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For the SIP, you can still invest the minimum amount of Rs. 500 at the start. Let’s understand the difference between lumpsum and SIP investment.

SIP Mutual Fund Investment: 

• As everybody is new when they invest in SIP for the very first time, so, one should start with a basic amount of investment with a low risk. Although SIPs are automated, you make regular investments and avoid making decisions in response to market changes.
• SIP is ideal for people who have regular earnings and are willing to achieve a long-term investment goal for a better future. It gives stable returns over a period of time. That is the period people have invested.
• It gives you the benefit of a regular habit of investing a portion of your salary, and you can also pause the investment anytime. Adding to this, SIP Investment diversification eliminates the need for market timing.
• It benefits from rupee cost averaging, meaning buying more units when prices are low and fewer when prices are high.

Lumpsum Investment: 

• It is said that lumpsum investment is best for a bearish market, meaning you can earn returns when the market comes into bull run. The lumpsum investment needs a large one-time amount, unlike SIP. Also, it has a high risk compared to SIP. The entire amount is subject to market volatility at once.
• You also need to focus on market conditions carefully as you have invested a large share, bonus amount. Adding to this, the amount is fixed in one go.
• The possibility of larger profits if invested when the market is down and then climbs dramatically.

(Disclaimer: Given the input is on an information basis, please seek professional advice.)