What are SIPs?
An SIP is a method of investment. All that you’re doing is to put money into a fund at regular intervals through the year. An SIP is not a product itself. The benefits of investing via SIPs include:
– Introduces discipline in saving
– Lets you build up to the amount you need for your goal gradually
– Allows you to invest at different market/NAV levels
What are lumpsums?
A lumpsum investment is when you invest a certain sum of money in a fund and you’re not doing it like clockwork every month. Like an SIP, lumpsum is also a method of investment.
– Lumpsum investments are not wrong.
– If you get your timing right you could be sitting on handsome gains.
– There are scenarios where investing lumpsum may be the best route to take.
– Timing is the key risk in lumpsum investing. Ensure that you make multiple lump sum investments, to capture different market/NAV levels to mitigate timing risk.
– Not all asset classes have lumpsum (timing) risk
SIP vs Lump sum..
The main question you need to ask is if the fund is a consistent and quality performer, one that has a clear strategy and the ability to stay ahead of the market and peers across market cycles.
There are no ‘best SIP funds’ or ‘good lumpsum funds.’ There are quality funds worth investing in and poorly performing funds that you can avoid or exit.
How to use SIPs and lumpsums effectively..
– Supplement SIPs with lumpsums
– Don’t stop with single lumpsum
– Do not get into the ‘invest and forget’ mode and make sure you review periodically.
– Highly volatile funds can be more amenable to SIPs than to a lumpsum.
Investment in securities market are subject to market risks read all documents carefully before Investing.
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