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Difference Between Sip And One Time Investment

By Author: jignesh shah
Total Articles: 9

There are two different ways of investing into Mutual Funds and both are an excellent form of investing. Both are preferred by the investors depending on their investment preference:

1. Investing under sip (Systematic Investment Plan)

2. Investing into a Lump-sum or One-time investment

A SIP (Systematic Investment Plan) is a discipline way of investing money in mutual funds. Depending on the schedule chosen you are literally forced to save money for that given period. In fact, the deductions are made automatically from your bank account into the preferred mutual fund investment on the specific date or period. Since you will be investing into the market at both the high & the low times, you will diversify your risk and therefore receive a weighted average return over a period of time.

SIP investment is more like a tool that encourages and brings discipline in your investments by allowing you to invest a certain pre-determined amount at regular interval be it weekly, monthly, quarterly or half-yearly). Not only this it also does not affect or disrupt to your monthly budget. It is more like having an organized way of managing your budget & finances. In SIP, as you have decided on your preferred mutual fund to invest, the fixed amount is deducted from your savings account at a regular interval as per the plan & preferences set with the mutual fund you’d decided to invest.

Here are few of the benefits of investing in SIP investments:

1. Averages your mutual fund purchase cost & maximizes the returns

2. You will be benefitted with the great power of Compounding

3. You can start investing in SIP with as low as Rs.500/-

4. Invest in small amounts regularly

5. Opt for monthly auto-payment

6. No worries about market ups & downs

However, A lump sum investment is a kind of investment opposite to regular investments. Here, in one-time investment the entire amount in invested at once into a chosen equity mutual fund. This form of investment needs to be done by somebody who has an idea of the market and is mostly done by more educated investors who have a better understanding of the markets and who understands equity market behaviour.

Advantages of Lump Sum investments are:

Investment of big amount at once
Ideal for long term investments where you do not have to worry about the market conditions.
Convenient one-time payment

About the author: The author of this article is an investment banker & provides consultation on market conditions & investment. He has been providing consultation on managing your finances at your convenience, whether SIP investments or long-term investments.

Total Views: 17Word Count: 427See All articles From Author

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