Mutual Fund investment: SIP vs Lumpsum - Which is better?

New Delhi: In the last few years, mutual funds have become increasingly popular among Indian investors. There are various schemes for different needs, in which investors can make good money in the long run. Mutual funds offer better returns than FDs because of the power of compounding. There are two main ways to invest in mutual funds. First SIP and second lump sum investment. Investors in SIP can invest a small amount every month and gradually create a large amount. At the same time, a large amount of money is invested in a lump sum at a time, which starts getting returns on the entire amount from the first day.

Investors are often confused about whether they should invest a large sum of money together or invest money every month through SIP. The truth is that both methods have their advantages and limitations. It depends entirely on your earnings, risk appetite and investment duration. Let's understand this whole math in detail with 3000 SIP vs 3 lakh lump sum.

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If you invest an amount of Rs 3 lakh in the market at a time, then your entire money depends on the market situation at the same time. If the market is at a high and falls afterwards, the value of your investment may decrease. But if you invest in a falling market then there is a chance to earn good money at the time of rebound. At the same time, your investment in a monthly SIP of Rs 3000 gets spread over time. This reduces the impact of market volatility. The benefit of Rupee Cost Averaging is available in SIP. That is, when the market falls, you get more units and when it rises, less. In this way, the rupee cost average balance remains in the long run.

Mutual Fund SIP vs Lumpsum: How much money will be made in 10 years? (Estimated Interest rate: 12%)

1) Investment in SIP

2) Lump sum investment

It is clear from the data that even by investing less in lump sum, one can get more maturity corpus than SIP, because the entire amount starts increasing from the first day. But there is an equally high market risk.

SIP is the most convenient method for salaried earners or those with a regular income. SIP is a great option to start with a small amount, reduce risk and maintain a disciplined investment for a long time. At the same time, if you already have a large amount of money available and you are comfortable taking market risks, then lump sum investment can give you higher returns.