If you wish to invest for the medium-to-long term, should you choose tax-free fixed deposit schemes or lumpsum equity mutual funds to grow your wealth? A recent study took the example of the Franklin India Prima Plus Equity Fund (FIPPF) to demonstrate that lump sum investments in the fund outperformed fixed deposits by yielding higher returns and minimising risks. A combination of lump sum investments in mutual funds and SIP (systematic investment plan) investments can be a powerful strategy to help you grow your wealth in 2024.
SIP vs lumpsum mutual fund: How to combine lumpsum investments with SIPs?
You must follow these points to effectively combine both modes of investment –
· You must get the timing right while investing a lumpsum amount: While investing in a mutual fund scheme via a lumpsum amount, you must keep two key points in mind – the timing should be correct, and the lumpsum amount should be significant. You must invest a lump sum at a time when the market conditions are favourable. This also means that you must have a good understanding of the market conditions if you wish to opt for a lumpsum mutual fund investment.
· Make regular SIP contributions: Rupee-cost averaging is one of the key benefits of SIP mutual fund investments. Regular SIP investments can help you purchase more mutual fund units when their NAVs (net asset value) are lower, and fewer units when their NAVs are higher. Doing so can also help you avoid losses in the long term.
· Invest for the long term: Consistent investments for the long term help investors make the most of SIP and lumpsum investments. You must have a long-term vision while combining SIP and lumpsum investments.
· Allocate your assets strategically and diversify your investment portfolio: To secure your investment portfolio from all forms of risk, you must invest across several categories of investment schemes. Diversification helps you mitigate portfolio risk and benefit from the growth of several sectors.
Points to consider while combining lumpsum investments with SIPs:
· Assess market conditions and invest accordingly: Combining lumpsum investments and SIPs might not be an ideal investment strategy for a first-time investor. You should have the expertise to be able to effectively analyse market conditions to effectively deploy this strategy.
· Clearly define your investment objectives: Knowing your investment objectives in advance can help you know the amount that you must invest as a lumpsum amount and the investments which you wish to start as SIP investments.
· Use financial calculators to check your returns before investing: You can use online lumpsum returns calculators and online SIP returns calculators to know the value of your investment returns in the future.
· Seek professional advice before investing a large sum via the lumpsum mode: If you are a first-time investor who wishes to combine lumpsum and SIP investments to grow your savings, you must consult an investment advisor before taking any investment-related decision.
In conclusion, combining lumpsum investments with SIPs can result in a powerful investment strategy that can help you considerably grow your mutual fund returns. However, you must have a good understanding of the market conditions to make lumpsum investments and must define your investment.
Disclaimer:
CBD:
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The Narcotic Drugs and Psychotropic Substances Act, 1985 (NDPS Act) outlaws the recreational use of cannabis products in India. CBD oil, manufactured under a license issued by the Drugs and Cosmetics Act, 1940, can be legally used in India for medicinal purposes only with a prescription, subject to specific conditions. Kindly refer to the legalities here.
The information on this website is for informational purposes only and is not a substitute for professional medical advice, diagnosis, or treatment. Always seek the advice of your physician or another qualified health provider with any questions regarding a medical condition or treatment. Never disregard professional medical advice or delay seeking it because of something you have read on this website.
Gambling:
As per the Public Gambling Act of 1867, all Indian states, except Goa, Daman, and Sikkim, prohibit gambling. Land-based casinos are legalized in Goa and Daman under the Goa, Daman and Diu Public Gambling Act 1976. In Sikkim, land-based casinos, online gambling, and e-gaming (games of chance) are legalized under the Sikkim Online Gaming (Regulation) Rules 2009. Only some Indian states have legalized online/regular lotteries, subject to state laws. Refer to the legalities here. Horse racing and betting on horse racing, including online betting, is permitted only in licensed premises in select states. Refer to the 1996 Supreme Court judgment for more information.
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