or SIP is a facility that is available with most schemes. This is not a separate product but it allows you to regularly in a scheme by fixing a periodic contribution.
Say you want toRs 3 lakhs over the next one year. Instead of trying to accumulate that much worth of savings and then in a scheme, you can simply break this up into smaller portions of say Rs 25,000 through a monthly SIP and reach your target amount for the year.
SIP and lump sumare both worthy ways to set up your account. It doesn’t have to be one or the other.
SIP is more about a disciplined approach to investing and has a place in everyone’s investment strategy.
SIP lets you plan better
through helps you plan your and manage your monthly fund flow better. You start an for as many months or years you choose and let the automated system do the rest. Your monthly spends and other can then be worked around this regular .
SIP also helps you cut through market volatility by continuing your a disciplined approach to investing and has a place in everyone’s .cycle when the market goes down or up, benefitting from both. SIP is more about
Lumpsum returns will always look better in the long run
In a developing economy like India, the estimated growth in the long term continues to be positive and greater than many other developed economies. In such a scenario the equity market returns in the long term are likely to follow a similar trajectory as economic growth.
If this assumption holds true, you will see that the equity market returns keep growing from one decade to another. As a result, the returns from a lump sumstarted a decade ago will tend to look better than SIP returns (started at the same time) given that your SIP continued through market peaks too.
However, it is perhaps incorrect to compare the two in terms of returns. What you should focus on is the discipline of. On one hand, SIP lets you cut through the noise and regularly. On the other hand whenever you have lump sum amounts, you should look at those as well. Both strategies work in the long run. The answer is not this or that, rather it’s a combination of the two.
Check out the difference between sip and mutual funds