Is SIP a better investment option than one time investment? (2024)

FAQs

Is SIP better than one time investment? ›

Thus, the major difference between lump sum and SIP is rupee cost averaging. One time investment fluctuates as per the market movements. On the other hand, SIP investment averages the cost of the units over time. Thus, one can choose SIP or lump sum for investment in mutual funds based on their investment objectives.

Studies have shown that SIP frequency, be it daily, weekly or monthly, has no major impact on returns. For instance, the difference in return between daily, weekly or monthly SIPs is negligible over time. However, you could struggle to monitor your investment if you opt for the daily SIP over the monthly SIP.

If you are an investor with a small but regular amount of money available for investment, SIPs can be a more suitable investment option. For investors with a relatively high investment amount and risk tolerance, lump-sum investments may be more beneficial.

Mutual Fund investments can be made in two different ways – one is through SIP and the other is one-time investment. Systematic Investment Plan or SIP is a regular investment of small amounts for the extended time period. Whereas, in one-time investment, the investor parks a lump sum amount for the specific time.

It is nearly impossible to consistently and precisely time the markets. SIPs do not, however, require you to time the markets. You consistently invest a fixed amount, regardless of the market conditions. You will receive more fund units when the market is declining and fewer fund units when the market is rising.

Yes. In reality, it is preferable to make a long-term investment in SIP. Instead of waiting for money to accumulate before investing, you begin investing with whatever amount you are able to save. This ensures that your money is always invested.

Things to Consider While Choosing SIP Plans for Long Term

Under a SIP, you invest a small amount of money at regular intervals in a mutual fund scheme of your choice. The majority of investments are made in equity-based mutual fund schemes. SIPs provide the opportunity for long-term gains and consistent savings.

Yes. In fact, it is better to invest in SIP for the long term. Instead of waiting and accumulating money to invest, you start investing whatever amount you are able to save. This way, your money is always invested.

You can take out money from a Systematic Investment Plan (SIP) before it's due, but the amount and process depend on the mutual fund's type, investment duration, and the terms of the fund house. Most funds have a minimum lock-in period, and breaking it might result in penalties.

To create wealth through SIP investments, tenure of a minimum of 5 years is recommended by a majority of experts. However, you must decide based on the factors mentioned above. Perpetual SIPs allow you not to set an end-date to your investments but yet stop it any time you wish to.

Is SIP really profitable? ›

SIP is an excellent long-term investment option for equity investors who want to build up a sizable corpus. SIP investments are proven to generate higher returns than traditional investments like gold, fixed deposit, PPF etc.