Lumpsum investment provides the investor with an opportunity where they can invest large amounts of money in one go. There are many schemes available that can help you with lumpsum investments. Nowadays, people prefer lumpsum calculator online to calculate the expected returns. Do you want to know more about lumpsum investment? If yes, then read ahead and learn more!  

What is a Lumpsum Investment?   

The lumpsum investment allows investors to invest their entire money at a single destination. For example, if you have a surplus amount of money and want to invest it for a particular goal, then lumpsum investment can help you. In addition, different schemes and plans are available in the market that you can choose from.   

Difference Between Lumpsum Investment and SIP  

The contrast between lumpsum investment and Systematic Investment Plan (SIP) extends beyond their modes of investing. Here’s a more comprehensive examination:  

  1. Frequency of Investment: SIP involves periodic investments, usually monthly, which can instil financial discipline and suit investors looking for a consistent savings habit. Lumpsum investments, on the other hand, entail a one-time capital allocation. 

  2. Risk-Return Profile: SIP is often favoured by risk-averse investors, as it allows for gradual market exposure and averaging of purchase costs. It suits those seeking a more stable, less volatile investment journey. Lumpsum investments, with their higher initial exposure to market fluctuations, may appeal to risk-tolerant individuals aiming for potentially higher returns. 

  3. Market Timing: SIP reduces the need to time the market, as investments occur regularly irrespective of market highs or lows. Lumpsum investments, in contrast, require a well-timed entry into the market, which can be challenging and may result in missed opportunities or higher risks if not executed wisely. 

  4. Diversification: SIP naturally promotes diversification by spreading investments across various market phases. Lumpsum investments, unless consciously diversified, carry the risk of being heavily exposed to market conditions prevailing at the time of investment. 

  5. Liquidity: SIP offers periodic liquidity, allowing investors to redeem units partially or fully at any interval. Lump Sum investments may lack this flexibility, as they typically involve a one-time commitment.  

Several options, such as SIP and lumpsum calculator online, are available to help you calculate the estimated returns on your investments.   

Benefits of Lumsump Investments   

A lump sum investment may be beneficial for investors in many ways. Some of the benefits are mentioned below.   

  1. Simplicity 

    It is a simplified option for investments compared to SIP, as the latter requires recurrent payment. Additionally, your SIP will need constant follow-ups, whereas lumpsum investors are free from these issues.  

  2. Less Cost

    A lumpsum investment is a one-time option, so it requires minimum charges. A SIP needs constant payments and input from a service provider, so increased cost is involved.   

Factors to Consider Before Investing in Lumpsum Investment  

Certain specific factors are involved that one should consider before investing in a lumpsum investment plan. They are as follows:  

  • Patience is one of the major factors that is required when you are investing in a lumpsum investment option.  
      
  • Market valuation is another important factor that you must consider. The market conditions fluctuate often, so one must check them properly.  
      
  • Thirdly, the return capacity of the investment. You should follow up with the market conditions to calculate the potential investment returns.  
      
  • Last but not least, the liquidity of the assets you have invested is another important thing you must consider beforehand.   

  

Conclusion 

Lumpsum investment is one of the popular investment options that you can try. If you are looking for a wealth creation option with a long-term plan, then a lump sum investment can be your choice. The potential of returns in this plan makes it a preferred option. So, the next time you invest in assets, try lumpsum investment.   

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.