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# SIP vs Lumpsum Mutual Fund

The biggest difference between SIP and lumpsum mutual funds is that SIP requires you to invest through regular installments, and the lumpsum investment requires you to invest a large sum of money at a time.

You can use online calculators to decide how much to invest with SIP and how much with a lumpsum as per your investment goals. A SIP calculator can be used to know the total wealth and earnings that you can accumulate by investing a certain amount in installments and a lumpsum calculator can be used to know the total wealth and earnings that you can accumulate by investing an amount at one point in time in a mutual fund scheme.

## What Is SIP In Mutual Funds With Example

SIP (Systematic Investment Plan) is an investment method provided by mutual funds wherein investors can invest a fixed amount in regular monthly, quarterly, or semi-annual installments with the amount being as low as ₹100.

For example, if you decide to invest through the SIP in a mutual fund with a 5-year lock-in period. The monthly installment amount is ₹1,000 starting from February 9th, 2024. Assuming the mutual fund gives a 12% return, then on maturity, you will receive a total amount of ₹82,486. You will earn total returns of ₹22,486 over and above the total invested amount of ₹60,000.

## What Is Lumpsum In Mutual Fund?

Lumpsum in mutual funds denotes the requirement to invest a lump sum at a single point in time. Investors who have a sizable investment amount and a high-risk tolerance can go with the lumpsum investment.

For example, if you decide to invest the lumpsum in the same mutual fund as you are choosing for the SIP with a 5-year lock-in period, you can invest the entire amount of, say, ₹60,000 in one go on February 9th, 2024. Assuming that the mutual fund gives a 12% return, then you will receive the total amount of ₹1,05,741 after 5 years on February 9th, 2028.

## Difference Between SIP And Lumpsum

The key difference between SIP and lumpsum is that SIP provides you with the flexibility to invest in a selected mutual fund in regular installments which can be done weekly, monthly, quarterly, or semi-annually whereas lump-sum investments involve investing at one point in time.

Here are the points of difference between SIP and lumpsum that will help you choose between the two:

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## SIP vs Lumpsum Mutual Fund- Quick Summary

• SIP is an investment method in mutual funds where a fixed amount is invested periodically which can be weekly, monthly, or quarterly.
• Lumpsum investment in mutual funds means investing the entire amount at once.
• The key difference between SIP and lumpsum is that SIP requires regular investing and lumpsum requires one-time investing.
• SIP investment decision doesn’t require a need to check the market volatility which lumpsum investing requires.

## SIP vs Lumpsum Mutual Fund- Frequently Asked Questions

### 1. What is the difference between SIP and Lumpsum mutual funds?

While lumpsum mutual funds require a significant one-time investment, systematic investment plans (SIPs) involve regular investments of a fixed amount. SIP offers rupee-cost averaging, whereas lump sum investments demand market timing expertise.

### 2. Which is better lumpsum or SIP?

SIP is better than lumpsum because you will get the benefit of rupee cost averaging and you can invest in small regular installments.

### 3. Can I do lumpsum every month instead of SIP?

Yes, you can invest a lumpsum every month instead of SIP but only as a completely different investment each time.

### 4. Will I be charged if I cancel SIP?

No, you won’t be charged if you cancel SIP, but sometimes you have to pay the exit load if you redeem it before the lock-in period.

### 5. Why lumpsum investing is better?

Lumpsum investment is a better option when investing in ELSS mutual funds or debt funds for a long period.

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