SIP OR LUMPSUM - WHAT SHOULD YOU CHOOSE

Investors are often faced with the dilemma of selecting between SIP and lump sum investments. Most importantly, they want to choose an option that gives higher returns. First, one needs to understand how SIPs (Systematic Investment Plans) work.

It is essentially a mechanism wherein you invest in equity or mutual funds either monthly or quarterly. Numerous fund houses provide the option of daily SIPs too. You have to select the amount you wish to invest at regular intervals. Keep in mind that this amount remains the same irrespective of market fluctuations. Let's say, you decide to invest Rs.4500 in an SIP on a monthly basis; this implies that each month on a specified date you will invest Rs.4500. Over the years, the SIP will add up and give substantial results.

Lump sum as the word implies indicates that a huge chunk of money is invested into the market at one go. This kind of investment behavior can fetch great returns at times but it can also be destructive when the markets are volatile. In such situations when it is tough to time the market, SIPs are a safe alternative. As a small amount of money is invested over an extended period, the risk is spread evenly as opposed to lump sum funds wherein the whole amount is at risk.

In addition, SIPs help to cultivate a regular habit of saving.

To summarize, before deciding between SIP or lump sum investment, it's important to understand your cash flow and financial goals. For regular monthly income, SIP is favorable, while lump sum investments suit irregular earnings. Set aside a portion of substantial funds and consider investing a small amount in SIP regularly. By effectively balancing between SIP and lump sum investments, you can build a healthy portfolio and achieve your financial goals smoothly.

Name: Praful Patil Firm Name: PATIL INVESTMENTS Mobile: 9833473537 Email: praful@patilinvestments.co.in