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POSTED BY ON June 10, 2014 8:58 am COMMENTS (9)
Hiya,
Whether to invest via SIP or Lump Sum in Mutual Fund for better return in a Equity based mutual funds?
I am in a situation where I have say 5 Lakhs Rs in hand to invest, on the other hand if I start SIP I am not sure I will be able to continue investing as I am expecting my income to reduce for various reasons so may not be able to afford to invest same amount.
Pros and Cons on both please?
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Sometime back I also had asked the same question and got a mixed response. So in the end, its one’s own call to go for lump sum or SIP. I took the mid way !!
I had invested nearly 50% as lump sum in 2 equity funds (spread over a 2-3 months through buying almost every week), about 25% in 2 debt funds from same fund house (where I had invested in equity oriented). Balance 25% kept in savings and did an SIP of small amount for a period 12 months.
Since the market was neither great not too bad in last 12 months or so, I didn’t gain /loose too much. But then now with market improving I am seeing a good return. The lumpsum investment done was also averaged out a bit due to additional SIPs and now to manage the similar ratio with which I had started (75-25%), I have moved some profit from equity to Debt.
Looks complicated but it was good result in the end.
Ashish
If the time horizon is 5 to 10 years, one can go ahead and invest even in lump-sum in mutual funds.
Another option is STP.
investing lump sum in mutual funds is not good…. try to invest only in SIPs.
So now, you are saying that you are ready to invest 5L in mutual funds…… in lump sum ??
Well thats an option I have.
Can you tell me why you prefer SIP over Lumpsum???
Mutual funds is linked with the market. The market fluctuates a lot every day.
So, investing in lumpsum in equity mutual funds is not advisable.
If you invest in SIP, you will get units of the fund for every SIP.
So, if the market is low, NAV will be low, so you will get more units.
If the market high, NAV will be high, you will get less units.
So, in a period of time, you will get the units at an average price which is good for you.
Suppose on the day that u invested in lumpsum, the market is very high, then u will get very less units…. which is not that good.
So, better invest in SIP.
As Anand said, you can invest 5L in liquid fund and from there u can do an STP to an equity fund of your wish.
Also, investing 5L which is pretty good amount of money now when the markets are at record high in lumpsome in mutual funds is not a good idea.
Also, please read articles by Manish on mutual funds…. if you understand, then only invest in mutual funds…. Please don’t invest in any product that you don’t understand.
Ok if you see the other side of the coin the market outlook seem to be positive after BJP win etc … so most likely the market is going to go up.. so if its keep going up for the next few years SIP may not be better as the NAV value will be keep increasing hence you will get less units..?????
Bear in mind I am not trying to argue but only trying to find what your thoughts on my view… 🙂
By the way I do understand MF, infact I have few MF’s via SIP so this may be one of the reason why I am looking for Lumpsum investment so I can average out my return incase if there is huge difference in returns in both method.
Gr8 …… Go ahead