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What is SIP, What is Lump-sum Investment?

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Systematic Investment Plan

SIP or Systematic Investment Plan is type of investment scheme offered by Mutual Funds where there is a provision of investing a fixed sum of amount in a Mutual fund scheme at a pre-set regular intervals. These intervals may vary from a week, a month, on a quarterly basis, half yearly or annual basis as well. Much like a recurring bank deposit, an individual can also allow their bank to deduct this amount in the prescribed time frame.

What is SIP, What is Lump-sum Investment?

At time it is considered as the safest way to invest in Mutual Funds in a disciplined manner. As is clear from its name it provides a systematic avenue of investment and is quite popular amongst investors.

Lump-sum Investment

It may be evident from its name itself that, as opposed to an SIP scheme, Lump-sum investment requires you to deposit the whole amount in a lumpsum investment. Apart from SIPs Lumpsum investment is also quite popular amongst investors. Especially investors who have a higher risk tolerance may find this investment plan more suited to them as it provides higher profits over a long time.

Advantages & Disadvantages of SIP & Lump- sum Investment

Advantages

SIP

  1. SIP may very well benefit from the power of compounding, whilst the principal has the potential to earn you returns, each return thereafter will also earn compounded returns.
  2. Given how small an investment is needed to get into SIP, the advantage of making the most of your hard earned money is also taken care of. An SIP can give you enough to achieve your periodic goal in life.
  3. SIP is best suited for salaried individuals who can have the benefit of an investment and not require a huge sum of money.

Lump-sum Investment

  1. Lump-sum investment allows investment for bigger amount and for a longer term. This type of investment is best suited for a long term investment to make the most of your investment.
  2. Individuals with large amount to invest find it more convenient to choose lump-sum investment
  3. Lump-sum investment can generate higher returns as the investor may choose to invest at a particular time. For example whilst the market is down and if it is showing signs of recovery a lump-sum investment can go long way in fetching more return.

Disadvantage

SIP

  1. The returns on an SIP is not as high as a lump-sum investment.
  2. SIP is less flexible in terms of its fixed amount and fixed dates of SIP debit from your account. This may not seem much but in a time where you can identify a certain positive scope in the market your SIP scheme may not allow you to make the most of it by investing more, or less in a contrary scenario.
  3. SIP does not suit people with irregular income or cash flow.

Lump-sum Investment

  1. This type of investment is not as systematic as SIP is, which actually encourages investment on a regular basis.
  2. Though the investor may choose when to enter the market, lump-sum investment does not make the most of positive trends in the market.
  3. The amount invested is locked for a certain lock-in period and may not be released for tending to a crisis.

Best lump-sum Investment Plan 2022

Best Equity Fund for Lump-sum Investment

  • Mirae Asset Emerging Bluechip Fund
  • PGIM India Flexicap Fund
  • PGIM India Midcap Opportunities Fund
  • Quant Tax Plan

Best Debt Fund for Lump-sum Investment

  • Kotak Savings Fund
  • ICICI Prudential Short Term Fund
  • Quant Liquid Plan
  • IDFC Banking and PSU Debt Fund

Best SIP Investment Plan 2022

Best Equity Fund for SIP

  • Quant Small Cap Fund – Direct Plan-Growth
  • Aditya Birla Sun Life Digital India Fund Growth
  • Tata Digital India Fund Regular Growth
  • PGIM India Midcap Opportunities Fund – Direct Plan – Growth

Best Debt Fund for SIP

  • ICICI Prudential India Opportunities Fund Direct Plan Growth
  • DSP Healthcare Fund – Direct – Growth
  • IDFC Government Securities Fund – Constant Maturity Regular – Growth
  • Nippon India Nivesh Lakshya Fund – Regular Plan – Growth
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