Mutual funds are a flexible way of investing in stocks than buying stocks directly for various advantages. People new to investment and willing to remain safe with strategised planning prefer mutual funds. It comes with two options: lump sum and the SIP method of investment. The lump sum method is investing a bulk amount at once, and will be locked in a particular period before which withdrawal incurs a fee. SIP is to invest small amounts every day, week or month, fora preferred duration of investment after which the investor can make decisions on continuation or withdrawal. A lumpsum SIP calculator allows them to identify their suitable plans based on the money to invest and the profit percentage.
Key aspects of mutual fund investment methods
As an investor, one has the opportunity to explore the SIP and lump sum methods of investment. Understanding key factors clears the pathway to choose the rewarding option. SIP investments, as explained earlier, an investor should invest small amounts starting from a minimum price as per company policies and either increase the investment amount or retain the same range for a specific period.
If your financial ability can afford a SIP investment regularly, it helps in maintaining a stable wealth without causing a burden. Ensuring to possess the money for every SIP is a must in this respect. When analysing the factors in a lump sum, it is all about putting an entire amount rather than investing regularly. The units get allocated based on the amount invested and don’t vary, unlike SIPs, where the number of units differs based on market conditions.
Suitability of SIP and Lump sum
To understand the investment methodology and the amount to put in every month or as a lump sum, one can use a SIP calculator with lumpsum estimations for a clear picture. When analysing suitability for investors preferring low risk, SIP would be an ideal plan as the amount invested gets adjusted based on current market fluctuations.
On the other hand, lump sums have a comparatively higher risk as the investor would invest a lump amount once, considering the market condition at the time of investment, it could either reap profits or incur losses. If your choice is long-term investment, SIP would be suitable; otherwise, for getting immediate returns within a short period, a lump sum helps, based on the mutual funds one chooses and market conditions.
Experience flexibility in investment
Mutual fund investment through SIP offers good flexibility in terms of changing the investment amount, but isn’t applicable for lump sum and is limited to partial redemption or an increase in investment with taxes applicable. The investment scheme chosen decides the tax implications which an investor should be prepared to pay.
If you desire a simpler management of investment plans, choose a lump sum as your investment method. SIPs are highly suitable for individuals willing to be under less pressure, with low risk factors and reduced impact of market fluctuations. Contacting an advisor for more information clarifies your investment doubts to streamline the process for beginning a smooth investment with a clear timeframe set to make profits.