In mutual fund SIP or One time deposit which is best?
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This is the one common and important question asked when it comes to investing in mutual funds. Before I answer this, lets first understand that there are two main ways of investing in a mutual fund 1. By investing a lump sum, which is a one-time deposit, 2. Through a Systematic Investment Plan (SIP)
In lump sum investment, the investor invests a huge amount of money in the market at one go. On the other hand, an SIP is a mode of investing in a mutual fund at relatively lower sums of money in the market at regular interval. Your interval of investment can be weekly, daily, monthly or yearly, that depends on the investor’s choice.
Now, coming to question, a lump sum investment is only suitable or advisable when you have a big corpus to invest, and you are sure that you might not need it immediately. So if you have gained money via inheritance, or after you have sold a large investment, etc. then one-time deposit or lump sum investment is best. However, if you have a limited amount to save due to any reasons as you have just started your careers then SIP is best for you. SIP scheme can be started with a minimum of Rs 500, it is the most first-time investor's go-to investment option.
But then, which form of investing is better? SIPs or lump sum? Yes, SIP is highly recommended for various reasons such as 1.You don’t have to worry about timing the market 2. You ensure rupee-cost averaging 3.You build the habit of investing However, this doesn’t mean a lump sum investment is not for.
Both routes of investment are effective and which one to choose from only depends on your availability of funds.
You have a lot more control in case you are opting for a One time or Lumpsum investment in Mutual Fund. You can chose your scheme and the time to invest in one go and get the corresponding units against the amount.
In case of SIP, irrespective if the timing is suitable or not, you have to go ahead with the investment as per the SIP schedule. One though cannot deny the possibility of an even out effect in the long run in SIP investments.