Monthly SIP or lump sum bet! Which method do smart investors choose to earn profits?
There are many people who want to earn better profits by investing in the market, but do not invest in it due to fear of market risk. They are afraid that their money may get lost. Mutual Funds are a very good option for such people. This market-linked scheme is considered to have less risk than investing money directly in stocks. A very good fund can be created through mutual funds in the long run. But there are two ways to invest in it. One is SIP, i.e., Systematic Investment Plan, and the other method is Lumpsum. Both methods have their advantages and disadvantages. Which method should you choose to earn profit? To understand this, you have to understand their advantages and disadvantages.
First, let's talk about SIP.
SIP is a very popular way of investing in mutual funds. The biggest advantage of SIP is that you can invest a fixed amount every month according to your convenience. You can start it from Rs 100 as well.
Flexibility in SIP
The advantage of SIP is that it gives you flexibility, that is, you can increase or decrease the investment according to your income over time, you can stop it in between if needed, and you can withdraw money anytime.
The benefit of averaging
The advantage of SIP is that you invest in it during all the ups and downs of the market. This gives you the benefit of rupee cost averaging. When the market falls, you buy more units, and when the market rises, you buy fewer units, which reduces the average cost of your investment. Due to this, your investment keeps getting averaged.
Big fund in the long run
Financial experts believe that if you invest money in SIP for a long time and keep increasing the investment little by little as your income increases, and also remain disciplined in terms of investment, then you can create a big fund through SIP.
This is the disadvantage.
However, the disadvantage of SIP is that you cannot take advantage of any major fall in the market. Apart from this, if you forget any installment of SIP, then you may have to pay a penalty.
Now talking about a lump sum
When you invest a lump sum in mutual funds through Lumpsum. The advantage of a lump-sum investment is that you can invest according to the market situation and take advantage of its fluctuations. You are not charged any kind of penalty, etc. in this.
Possibility of bumper profits
If you invest money at the lower level of the market, then when the market rises, your entire money will grow together. This can give a much higher return than SIP.
But... Lumpsum also has a big "risk"
If you mistakenly invest money at the peak of the market, then your entire investment will go negative at once. It can take years to recover from that loss and make a profit, which is very mentally disturbing.
SIP Vs Lumpsum
Experts believe that SIP is best for working people, beginners, who cannot time the market and want to invest for long-term goals (such as retirement, children's education), while a lump sum can be better for experienced investors who understand the market, can take risks, and who know when the market has fallen.
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