SIP vs Lump Sum - Which Is Better? - Franklin Templeton India

s IP or

lump

sum,

which

is

better

, there are some things that will always be confusing and you just can't understand them and one thing that confuses most people is what is the best way to invest if you invest systematically or in

lump

sums for for get higher yields, face that question, okay, your perspective, suppose both you and your neighbor want to grow flowers in your respective gardens for a period of one Europe, you both go to the market together, but while you buy all your seeds and plant them in once, you decide to buy and plant only a few each month and the price of seeds remains constant throughout the year, so

which

of your gardens is most likely to be full of flowers by the end of the year, obviously, the garden.

That gave all the seeds a full year to grow and flowering will be the clear winner here, but how about a more practical scenario for this theory? Well, yours says that you invest a lump sum in your savings bank account of rupees one lakh twenty thousand on December 31, on the other hand, his wife invests 30000 rupees every quarter. Now you both start investing in a bank deposit on January 1, but while you invest in a fixed deposit, his wife invests in a recurring deposit that matures in exactly one year. In both cases, the interest is compounded quarterly, although you both invested the same amount after a year, you will have accumulated a larger sum than your wife.

This is simply because, while his entire amount was invested for all of Europe, his wife invested 30,000 for the year. 30,000 for nine months. 30,000 for six months and 30,000 for just three months, so the average investment period is actually quite short, earning less interest on you. Even if the wife had been able to negotiate a higher rate of 9% annually, the accumulation would not be enough. Even with 10% and 11% it would not be on par, only at a rate of 12 over 70% would the accumulated sums be equal. That's a big difference for its creator. This says a lot about giving investments time to grow.

Don't wait, although there are always two sides of a coin. Back to your garden, let's imagine that seed prices dropped every month starting in the second month and continued to drop until the end of the year since your neighbor bought seeds. the same value every month as the price went down, he got more seeds from the market at the same price. You now have many more seeds to plant each month. Wow, now which garden will probably look fuller at the end of the year. Yes, exactly, now imagine. You chose to invest your capital in an equity mutual fund worth 20 rupees, thus giving you 6,000 units.

His wife also invests in the same scheme and received 1,500 units on January 1. On April 1, the enemy was 18 rupees, which gave him sixteen hundred and sixty. six point sixty seven units rupees 15 on the first of July, which gives you two thousand units and rupees seventeen on the first of October, which gives you one thousand seven hundred and sixty four point seventy one units, now fast forward to the 31st of December when you get your statements in any view of rupees twenty-two, the value of your investments has now increased to rupees one lakh thirty-two thousand in a year, that's a 10 percent return, but wait, your wife, who invested in the same plan as you, now you have a much larger amount, but you invested by a lot.

However, for longer, so how did this happen? Simple at three different points during the investment period. His wife managed to invest with a lower sailing value than you at the beginning of the year, thus benefiting from a lower average cost during the year. His wife managed to buy six. 1937 1.37 units compared to the six thousand units she bought at the beginning of the year. Furthermore, the purchase price of each unit was twenty rupees, while its average cost during the year was 17.31 rupees. This concept is called rupee cost averaging. Makes sense. and this is only one side of the story in the above example, the nav continued to fall during the reversal period, but what would happen if the NE rose?

The story would be very different, as a lump sum investor at the beginning of B.'s investments he would have done much

better

, there is even a third angle to the story: if he had withdrawn all his investments on the first of October, he would have received a better navigation. higher than December 31, so the value of your investment would be one rupees eighty thousand compared to rupees one lakh sixty-eight thousand It is not easy to decide which is better if lump sum strategies work if an investor manages to invest When markets consistently rise systemic strategies, on the other hand, work best when prices fall with opportunities to invest at lower levels, the deciding factor between the two will be the frequency of investments and when you withdraw your investments, as for choose between whether P and lump sum, don't worry, now you know the difference and know the benefits of each one.

There is no correct answer. Think about your situation and your goal before deciding whether to plant all the seeds at once or a little at a time. Either way, you'll potentially have a garden full of flowers. We hope you enjoyed watching this video. See more and us. We will help you learn different investment concepts. You can also write to us with your comments to the editor. Investments in Templeton com mutual funds are subject to market risks. Carefully read all documents related to the plan.