Confused to invest? Learn the major differences in SIP and Mutual Funds

Earning and investment should go hand in hand. When you start earning, it is time to start investing alongside. There are numerous investment options to choose from, from investing in fixed and recurring deposits, insurance, pension and post office saving scheme, to investing in the market directly in shares and other stocks to judiciously investing in mutual funds and SIPs which cause a lot of confusion. However, it is imperative to understand the difference between sip and mutual funds when it comes to investing in the market and staying invested for a long duration.

The kind of market risks involved and the ease of investment are primary points of difference in addition to diversification of portfolio and valuation of investments after a few years, based on the returns generated.

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Let us explore and understand the distinction between a lumpsum fund deposit in a mutual fund and a SIP investment:

  1. Difference in methodology: Investing in mutual funds in a lumpsum manner allows for availing the benefit of low cost at one time, and the number of units allotted remains the same throughout your investment period. However, the investments made in parts through a SIP allow for the variation in the market to decide the cost of units as well as the benefit of collecting the units that can be used in the long term.
  2. Compounding benefits: When you invest small amounts regularly in the form of a SIP, you can grab the opportunity to find compounding of the funds due to the investment style of getting returns and re-investing the whole amount. Thus, you can get more units in the same period and thus the units become more valuable. This feature is considered to be the most useful in achieving your financial target in the long run.
  3. Flexible investment: As the investment amounts are spread over a long period with small amounts getting due each month, the flexibility in investing helps you to use a part of the money to meet your current expenses as well as invest prudently. Most of the time the salaried class does not have any spare funds to invest in one go. The option of investing in small amounts leading to big returns is thus the most ideal for all such prospective investors.

Nowadays several investment options are available and it becomes difficult to choose the right investment alternative according to the financial condition and status of the investor. It is at such times that the choice is facilitated by investment advisors. One of the most suitable and reliable options is the ICICI prudential mutual fund, which is a growth-oriented alternative and brings wonderful returns in the long run.

Conclusion

While lumpsum investments suit the needs of a one-time investor, starting a SIP helps to be in better control over the money invested. Most of the profitable and prestigious funds are associated with international investments, in one or the other form, and thus attract a lot of people in our country. Mutual fund investment is profitable and reliable provided you put your money in the right hands. The fund advisor would guide you to park your funds wisely and far-sightedly to maximise your returns. So, call your advisor and avail the benefit of letting your invested money earn multiple returns for you.