Which is Better for Wealth Creation, SIP or Lumpsum ?


Systematic Investment Plan or, SIP in mutual Fund schemes has gain its popularity among the retail investors who have participated more after 2017 with the rise in financial awareness . Mutual fund investments is well known for wealth creation or we can term it as a habit of saving for future uncertainties.

Be it as Lumpsum or SIP mode , the final goal is to maximize the wealth and creating a sound corpus for an individual keeping in view the impact of inflation. Lumpsum investment allows an individual to park money in the market at once at the starting of the investment cycle and wait for the maturity for the portfolio to grow . During these time period, a fund or portfolio passes through various volatalities and economic turmoils and finally turns out to be fruitful if planned and redeemed prudently.

SIP in mutual funds works on the same principle but the difference is that in this mode an investor invests on a regular basis with a periodic intervals which allows them to gather units at different market prices at different time of investments with prevailing market prices or prevailing unit prices.

Lumpsum and Sip returns seems different if started at the same time and in the same scheme . This is because the time and unit price for purchasing that units. In the lumpsum investment all the investment purchses units at one price whereas in the sip ,different units purchased are priced differently. it may possible that at some time when unit prices are lower, then an sip will get more units in the particular scheme and vice versa. This not only make sip a better route because it may also happen that at the starting point when lumpsum and SIP both started, the unit prices were ow and after that unit prices starts soaring and growing, in this case lumpsum maount gathers more units at cheap prices at its initial stage and sip continue to buy at costly with regular intervals with growing time.

Bove facts may not always possible as the market is known for its volatality and the factor which could beat the paradox is the time period for which the investment has been made as this would allow the sip to get averaging oppurtunity and lumpsum too will get ample oppurtunity to grow simultaneously.

As a whole, Sip is suitable for those who can not investment a hefty amount at once and vice versa. The thing to keep in mind the time which is to be as long to create a wealth for which the investment has been made. START EARLY AND INVEST LONG TERM.

By,
saket kumar singh
Lakshya Wealth