InvestorQ : Is it better to do SIP or do a one-time investment?
Rohan Bhadani made post

Is it better to do SIP or do a one-time investment?

4 years ago
This is probably one of the most important question when it comes to investing in mutual funds for it is also one question that reigns supreme in the minds of all you investors. So, let’s dive in, shall we? You must understand there are two main ways of investing in a mutual fund 1. By investing a lump sum 2. Through Systematic Investment Plan (SIP) A lump sum investment means that you have a huge chunk of money available with yourself at a particular time and you want to invest that in the market. In contrast, an SIP is a recurring investment tool that usually, but not necessarily, invests relatively lower sums of money in the market. A lump sum investment happens when you have a big corpus to invest and more importantly, you don’t need that corpus for any purpose (at least not immediately). This could be the money you gain via inheritance, or after you have sold a large investment, etc. The prerequisite needed for making a lump sum investment is that you do not need to mobilise your capital at least in the near future. In contrast, an SIP is done by those individuals who have just begun their careers, or have investments in other asset classes and are diversifying their investments. As SIPs can be done with a minimum of Rs 500, it is most first-time investors go-to investment option. But then, which form of investing is better? SIPs or lumpsum? 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 lumpsum investment is not for. A lump sum investment in mutual fund is subject to the availability of funds at your end and to your need to mobilise the same. If you invest a lump sum in the equity market on a day when the market is at a high, you will end up getting fewer units vis-à-vis what you would get if you were to invest on a day when the market wasn’t performing too well. This is, honestly, the only difference in investing in lump sum versus investing in SIP. Most people prefer the SIP route because they neither have the time to act on the market levels, nor do they have excess cash ready to be invested in to the market. Both routes of investment are effective and which one to choose from only depends on your availability of funds. Hope this helps!