Lump Sum & SIP: What Suits Your Purpose, and When?
Investors can deploy their funds in the market in two ways. It can be a
lump sum or through SIPs. Both these methods are equally effective under
different circumstances. This TM Learn will help investors in determining
what's best for them.
For beginners, investing can be a tricky business, with risk management
being a crucial part of it. The growth prospects of your investments depend a
lot on how you are deploying your money.
Investments can be
made in two ways:
1) Investing a sizable chunk at one go, commonly referred to as lump
sum. Or,
2) Break down your investments into smaller sizes and allocate them
towards investment at periodical intervals. Like every week, month, or quarter,
known as the SIP style of investing.
Now, let’s decode both the styles one by one to understand their unique
characteristics:
1) Lump Sum Investment
Lump sum or one-time investing implies that investors invest their
capital in one shot and top up the investment when necessary.
Advantages of Lump
Sum Investing
This method is generally suitable for experienced or high-net-worth
investors. They must possess a high-risk tolerance towards market fluctuations.
Lump Sum Investing allows the investors to utilise the market momentum
in their favour. This style is generally convenient for individuals who have a
large amount to spare for their investments.
The chances of making gains on lump sum investments are high when the
market has gone through a volatile period and it is preparing for its way up.
It is also well suited to meet financial goals. Besides, it is an ideal
wealth-creating instrument over the long term. Read More about lump sum investment
Comments
Post a Comment