What Is the Difference Between Systematic Investment Plan and Lumpsum Mutual Fund?

Lumpsum Mutual Fund

A lumpsum investment enables investors to deposit the entire amount available in one go for acquiring their desired number of mutual fund units. This route of investing tends to be beneficial when a fund’s net asset value or NAV is less. Here, a lower NAV allows individuals to acquire more units. On the other hand, a higher NAV reduces the number of units for an investor.

Now, with the basic idea of the investment modes clear, let’s move on to the difference between SIP and lumpsum.

Systematic Investment Plan (SIP)

A SIP or systematic investment plan allows an investor to allocate a small sum of funds regularly in their preferred mutual fund scheme. As the term implies, this is a systematic method of allocating fixed amounts of money in a periodic manner. This can be semi-annually, quarterly or monthly, etc.

On activating a systematic investment plan, a fixed amount gets deducted from an individual’s bank account on a monthly basis. As a result, achieving one’s financial goals can become easier if he/she invests steadily in this manner.

Unlike a lumpsum investment, individuals spread their investment over time with a systematic investment plan. Therefore, one need not have substantial funds to get started with an MF investment through SIPs. This, in turn, helps them instil a sense of financial responsibility in the long run.

Given below is a comparative analysis of SIP vs. lumpsum:

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