What is the difference between Lumpsum and SIP in Mutual Funds?

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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