What is the difference between Lumpsum and SIP in Mutual Funds?
Mutual Funds are investment instruments that
collect investors money and invest in various securities in order to get
returns on the investments. The money invested is managed by a professional
fund manager.
SIP is just a way of investing a fixed amount
in mutual funds on a regular basis. You are allocated a certain number of units
based on the ongoing market rate (called NAV or net asset value) for the
day.Every time you invest money, additional units of the scheme are purchased
at the market rate and added to your account. Hence, units are bought at
different rates and investors benefit from Rupee-Cost Averaging and the Power
of Compounding.
You can also invest in mutual funds as a one -
time investment which is also called lumpsum. Every mutual fund scheme is available in two
variants - direct and regular. Direct schemes are bought directly from the AMC
and do not involve any intermediary.
Direct schemes have a lower expense ratio since
no commission is paid to the distributor. So you get more returns compared to
regular schemes.
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