Difference Between SIP and Lumpsum
When it comes to investing people consider it an additional source of income, so most of the time people ignore
to provide their valuable time to enhance their investment skills.
Before understanding the difference between SIP and Lumpsum, let focus on what both the term means.
Systematic Investment Plan (SIP) :
A systematic investment plan is a process of investment where you make an investment in terms of savings,
it may either on a daily, weekly, or monthly basis. Some of the SIP even start at a price of 500 as well.
For Example: you can invest 500 rs for the first few months, and then switch it to 1000 rs whenever
you like.
Lumpsum:
Lumpsum as the name itself represents it means investing your money at once just similarly to fixed deposits.
For Example: Investing 1 lakh rs in a company for a specified period of time for a specific rate of interest.
| Nature | SIP | LUMPSUM |
| Definition | Systematic investment plan investment as per your budget fits | Lump-sum Is a onetime investment in like fixed deposit |
| Cash flow | Investment can be made the system according to your plan | Investment has to be made in one-time payment in lump sum amount |
| Flexibility | High compared to a lump sum | Low compared to SIP |
| Profit | High compared to a lump sum | Low compared to SIP |
| Risk | Lower compared to a lump sum | High compared to SIP |
| Cost of investment | Less due to rupee cost averaging | High as this is a one-time large investment |
| Growing market | Less recommended | More recommended |
Conclusion:
Although it might not seem much of a difference between SIP and Lumpsum, there is,
the most certain risk is of interest, in both cases, the benefit of interest fluctuation is higher
If you are a salaried person it is better to go for SIP either than Lumpsum.
Mutual Funds investment is subjected to market risk read all documents carefully.
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