For those who are afraid of investing directly in the stock market, investing in Mutual Funds is a very good option for them. Mutual funds are considered less risky than investing directly in stocks. The return on this is according to the market. In the long run, a lot of money can be made from mutual funds. This is the reason why people are getting increasingly attracted to mutual funds in the recent past.
Investment can be made in Mutual Funds in two ways. One is SIP i.e. Systematic Investment Plan and the other method is Lumpsum. Both methods have their advantages and disadvantages. If you also want to start investing in mutual funds, then understand the advantages and disadvantages of Lumpsum and SIP.
SIP
- First, let's talk about SIP because it 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.
- Another advantage of SIP is that it gives you flexibility, that is, you can increase or decrease the investment over time according to your income, you can stop it in between if needed and you can withdraw money anytime.
- The advantage of SIP is that you invest in it amidst all the ups and downs of the market. Due to this, your investment remains average.
- Financial experts believe that if you invest money in SIP for a long time and keep increasing the investment in it little by little as your income increases, and also remain disciplined in terms of investment, then you can create a huge fund through SIP.
- 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.
Lumpsum
When you invest lump sum money in mutual funds through lump sum. The advantage of 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. However, in a lump sum, you do not need to invest continuously on a fixed date, whenever you have lump sum money, you can invest it in mutual funds.
However financial experts believe that money should be invested in lump sum only when you have a large capital and you have a good understanding of the market. A small mistake in this can also cause you loss. But if you are new and you want to get good returns by taking less risk in the market, then SIP can be the best option.
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