Lump Sum Amount Or SIP Into Mutual Funds?

Lump Sum Amount Or SIP Into Mutual Funds?

 

There are many benefits of investing in mutual funds and we know that. There are automated trading robot systems in place that let you buy equities and trade in them. However, if you still do not have the time to trade and monitor the portfolio yourself then opt for a mutual fund scheme.

Once you understand the importance of mutual fund investments you need to know how to invest in them. You could either choose to make a lump sum investment or opt for a systematic investment plan. The lump sum investment is where you do a onetime investment into the mutual fund scheme. The SIP plan lets you invest regularly into mutual funds

Why do investors prefer to invest lump sum money?

An investor who suddenly gets a lot of money either say after retirement or after the sale of a property decides to invest a lump sum into the mutual fund scheme. But the debate still continues whether one should opt to invest a lump sum or systematically through anSIP plan.

 

The investors who choose to invest lump sum money into the mutual fund scheme should know how to time the market. If you end up investing the lump sum amount after the bull market gets over then you will end up losing a lot of money. Thus when you invest a lump sum amount take care to understand when the bear market could end and look for a trend change. The investor should invest in the market at the time when the market is at its lows and is about to change its trend to bullish.

 

Systematic investment plans area smart way to invest into mutual fund schemes. This is an option that is preferred by those who want to stay invested in the market for long. But again if you get some lump sum money from somewhere then instead of not keeping it in a bank you could invest it into a mutual fund. Just take care that you time the market well in this case.

 

SIP or lump sum

Again the choice is yours. If you are a professional who understands the market and knows when to invest then investing a lump sum amount is the best bet. You understand the low of the market and then you time your entry based on when the trend changes.

However, if you are a beginner or someone without any detailed knowledge of the market thenanSIPinvestment is recommended for you. This way you can spread out your investments and then average out your purchase price.