Is SIP a Better Investment Option than One -Time Investment?

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. The question now arises, which is the better way? Is SIP a better investment option than one-time investment or it’s the other way round? The comparison of both is like comparing apple and oranges. The path may be different but the objective is to help build capital. Let’s discuss both of them to get a better picture of how they help in achieving the financial goal.

Systematic Investment Plan in Mutual Fund

SIP is a disciplined form of investment where the investor invests a fixed amount of money at a regular interval. It is a suitable option for small and individual investors. The features of investing through SIP are as follows:

  • It channelizes and encourages regular investment
  • It can be started with the amount as low as ₹500
  • It is a smart financial planning tool that helps to build a corpus over time
  • SIP offers the benefit of rupee cost averaging
  • The deduction is automatically made from the account on the selected date post activation of SIP

Lump Sum Amount Investment in Mutual Fund

The investor can invest money in a mutual fund through a single transaction if they have a large corpus to invest. The features of one-time investment are:

  • It is rewarding in the long term therefore, the investment horizon should be kept long
  • It is an ideal option for people who can take risk in anticipation of high returns
  • It helps in meeting financial goals
  • The investment is made by issuing a single cheque of the lump sum investment amount
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SIP vs One-time Investment in Mutual Funds

The table below shows the difference between SIP and One-time investment:

BasisSIPOne time Investment
Mode of InvestmentInvestment is made in installmentSingle investment of lump sum amount is made
PeriodAll installments are not invested for same timeFull amount is invested for the entire period
Ideal InvestorsIt is good for beginners It is best for educated investors who have a better understanding of markets

To start investing in mutual fund one can opt for either way. Both are the ideal ways of investing in the mutual funds for wealth creation. Each has its unique way of benefiting a particular class of investors.

 

Disclaimer – Mutual Funds are subject to market risks. Please read the scheme related documents carefully before investing.

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