SIP and Lump Sum:- All your investments should be in line with your investment profile, which includes your income, risk profile, expenses, and financial objectives. You can invest in a Systematic Investment Plan (SIP) or make a lump-sum contribution, depending on your financial situation. We wi provide you Details here about SIP and Lump Sum in Investment Fund
Table of Contents
SIP and Lump Sum in Investment Fund
The only type of mutual fund that can help you save taxes under Section 80C of the Income Tax Act of 1961 is the ELSS (Equity-Linked Savings Scheme). Mutual funds can be purchased in two ways. The first is through Systematic Investment Plans (SIPs), while the second is through a single lump-sum investment.
Lump Sum Investment
It’s a one-time investment of, say, Rs 1,000,00 that you make. If you have a large sum of money to invest and a high-risk tolerance, a lump-sum investment may be the best option for you.
SIP (Systematic Investment Plans)
Through a SIP, you can invest in mutual funds in a phased manner (Systematic Investment Plan). SIPs allow you to invest a little sum on a regular basis, such as Rs 10,000 per month over twelve months. If you don’t have a large chunk of money to invest, a SIP is a great option. SIPs have lately gained popularity since they allow for regular investments. Your SIP can be scheduled weekly, monthly, quarterly, or bi-annually, according to your preferences. SIPs are open-ended, which means you can start or stop them at any moment. If you don’t have enough money to invest, you can put your SIP on hold for a while. There are no fines for investors who choose to stop or pause their SIP.
You can start a SIP once you’ve determined that a mutual fund is appropriate for you to invest in. All You’ll need is a bank account which you can link to your investing account. You can use ECS or give your bank standing instructions to transfer a particular amount from your account into the mutual fund scheme of your choice on predetermined dates to make the SIP investment process go with ease.
Advantages of SIP over lumpsum Investments
- There’s no need to keep track of the market or schedule it: Many investors, particularly inexperienced ones, are unsure when to enter the market. When you invest a large sum of money in one go, you run the danger of losing a big chunk of your money if the market crashes.
- Rupee cost averaging: SIP allows you to invest in a variety of market cycles. You will acquire more units when the market falls. When the stock markets begin to rise, you will also acquire fewer units. It will assist in lowering the cost per unit of purchasing the units. Rupee cost averaging is the term for this situation.
- Make it a habit to invest: Because SIPs require you to set away a predetermined amount of money on a regular basis, you will become financially disciplined.
- Suitable for aspiring investors: If you’ve recently started your professional job, a SIP is a great way to get your feet wet in the world of investing. This manner, you can get exposure to equities for as little as Rs 500 per instalment. Later, depending on your investment needs and risk appetite, you can move into riskier stock programmes.
- Better results in the past: SIP investments have consistently outperformed lump-sum investments over the long term (5+ years).
Detailed Explanation Of Lumpsum With Example
Let’s say you have Rs 10 lakh in your bank account and want to put it into an ELSS. A lump-sum investment is not recommended unless you are a market genius who knows which program to choose. There are two options for investing this sum:
Start a monthly SIP with a sum that is comfortable for you, such as Rs 10,000, Rs 20,000, or Rs 50,000. Allow the cash to remain in your bank account until they are all invested in the selected equities funds in a systematic manner.
Put the lump sum money into a liquid fund. Then, from the debt fund to the ELSS, begin a Systematic Transfer Plan (STP). Your savings account will not only produce larger returns, but it will also allow for systematic investing.
End Your SIP
Stopping your SIP before reaching your investment objective is never a good idea. Market fluctuations should have no bearing on your judgments. Keep in mind that the longer you invest and the more you invest, the greater your return on investment will be. Once you’ve made the decision to stop a SIP, you must notify the fund house. You can do this by entering into your mutual fund investment account and filling out and submitting the stop SIP’ form. Alternatively, you can go to a fund house’s branch and submit a properly completed SIP cancellation form. If you’ve activated ECS, make sure to notify your banker as soon as possible to deactivate it.
What is the best way to invest in a SIP?
Before you start a SIP into any mutual fund scheme, be sure that the objectives and risk levels of the mutual fund scheme you’re considering meet your risk tolerance and profile. You can start a SIP once you’ve determined that a mutual fund is appropriate for you to invest in. You’ll need a bank account that you can link to your investing account. You can use ECS or give your bank standing instructions to transfer a particular amount from your account into the mutual fund scheme of your choice on predetermined dates to make the SIP investment process go smoothly.
FAQ’s
The most convenient way to invest in a mutual fund scheme is through a systematic investment plan, or SIP. You can stagger your investments over time with a SIP by investing a certain amount at regular intervals.
Before you start a SIP into any mutual fund scheme, be sure that the objectives and risk levels of the mutual fund scheme you’re considering meet your risk tolerance and profile.
You can cancel your SIP by connecting into your mutual fund account with the fund house and filling out the ‘Stop SIP’ form. This service is also available to R&T agents and third-party sites with whom you have made investments. In the comfort of your own home, you can terminate a SIP with a few clicks.