Benefits of Lumpsum Investment
Advantages of Lump Sum Investment:
- Potential for substantial growth: Deploying a large sum at once can result in considerable growth, particularly during bullish market phases.
- Tailored for long-term objectives: Lump sum investments align effectively with extended financial goals, facilitating compounded growth over prolonged periods.
- Simplified approach: This investment strategy streamlines the process by consolidating investments into a single transaction, eliminating the hassle of managing multiple investment dates.
How is lump sum different from SIP?
A lumpsum investment is when the depositor invests a significant sum of money on a particular mutual fund scheme. SIP or Systematic Investment Plan, on the other hand, entails the investment of smaller amounts on a monthly basis. Both these type of mutual fund investment strategies have their fair share of benefits. Explore How is lump sum different from SIP below:
Investment amount:
- Lumpsum: In a lumpsum investment, you invest a substantial amount of money in a mutual fund scheme in a single transaction.
- SIP: With SIP, you make periodic, usually monthly, investments in a mutual fund with a fixed amount.
Market timing:
- Lumpsum: In a lumpsum investment, you enter the market at a specific point in time, risking potential market fluctuations.
- SIP: SIP allows you to invest regularly and benefit from rupee cost averaging, buying more units when prices are low and fewer units when prices are high, reducing the impact of market volatility.
Risk management:
- Lumpsum: Lumpsum investments can be riskier due to their sensitivity to market conditions at the time of investment.
- SIP: SIP spreads your investment over time, helping manage market risk and reducing the impact of market volatility.
Investment discipline:
- Lumpsum: Lumpsum investments do not necessarily enforce a disciplined approach to investing.
- SIP: SIP promotes discipline, as you commit to regular investments regardless of market conditions, fostering a systematic and long-term approach.
Initial investment size:
- Lumpsum: A lumpsum investment usually requires a larger initial amount, which may not be feasible for all investors.
- SIP: SIP allows you to start investing with a smaller initial amount, making it accessible to a broader range of investors.
Which will give better returns – lumpsum or SIP?
The answer to this question depends on various factors, such as the investment period, market conditions, and the type of investment. While both lumpsum and SIP investments may offer good returns, the returns from lump sum investments tend to be higher over the long term. This is because it allows the investor to take advantage of the market's ups and downs, leading to a better return on investment (ROI). Using the SIP calculator and Lumpsum Calculator to assess the suitable investment approach aligned with your future objectives. With this knowledge, you can make an informed decision between SIP and lumpsum, selecting the more advantageous option.
Advantages of lumpsum investment over SIP
Some of the advantages of lumpsum investment over SIP include:
- Higher returns: A lumpsum investment offers higher returns over the long term. This is because the entire amount is invested upfront, and the investor can take advantage of the market's fluctuations.
- Lower costs: It helps save on transaction costs since there is only one transaction and also lower investment management fees, as compared to SIP investments.
- Flexibility: A lumpsum investment provides more flexibility in terms of the investment period, as the investor can choose the period according to their financial goals.
A step-by-step guide to invest in mutual funds
Step 1: Visit the Bajaj Finserv website or download the app from Google Play Store or App Store
Step 2: Navigate to 'Investments' and click on 'All Investments' on the home page
Step 3: Click on 'Mutual Funds' icon
Step 4: Click on 'Explore Funds'. You will be redirected to the mutual funds listing page
Step 5: Filter by scheme type, risk appetite, returns, etc. or choose from the top performing funds list
Step 6: All the mutual funds of the particular category will be listed, along with the minimum investment amount, annualised return, and rating
Step 7: Click on 'Invest Now'
Step 8: Enter your mobile number and sign in using the OTP
Step 9: Verify your details using your PAN, date of birth. If your KYC is not complete, then you will have to upload your address proof and record a video
Step 10: Enter your bank account details
Step 11: Upload your signature and provide some additional details to continue
Step 12: Choose and select the mutual fund that you want to invest in
Step 13: Choose whether you want to invest as SIP or lumpsum and enter the investment amount. Click on ‘Invest Now’
Step 14: Select your payment mode i.e., net banking, UPI, NEFT/ RTGS
Step 15: Once your payment is done, the investment will be complete
Your investment will start reflecting in your portfolio within 2-3 working days.
Factors to consider before investing in lumpsum investment
Before investing a lumpsum amount, consider the following factors:
- Risk tolerance: Lumpsum investments come with a higher level of risk, and it is essential to consider your risk tolerance before investing.
- Investment goals: Determine your investment goals and choose an investment product that aligns with them.
- Market conditions: Study the market conditions and choose an investment product accordingly. It is also essential to keep track of the market and make necessary changes to your investment portfolio when required.
- Time horizon: Consider your investment period and choose an investment product that suits your time horizon.
Conclusion
Individuals can make mutual fund investments by regularly investing in a SIP. You can also make a lumpsum payment whenever they receive windfall income or a bonus. Closed-ended mutual fund schemes only accept a lumpsum investment. In this, the entire investment is made up front. Investors can choose the mutual fund scheme according to their financial goals and invest the entire amount in one go. Lumpsum mutual fund investments come with a higher level of risk, but they also offer the potential for higher returns over a period.
Calculate your expected investment returns with the help of our investment calculators