Module 5: How to Invest
Topic: Investing through SIPs and Lumpsum
Lumpsum:
A lump sum investment is a one time investment that is made in one go in a mutual fund scheme. For instance, investing a sum of ₹ 1,20,000/- in a mutual fund, in one go can be considered as a lump sum investment.
However, if you choose to invest the same amount i.e. ₹ 1,20,000/- in a staggered manner (example, 10K every month for 12 months), then it's called a systematic investment.
Systematic Investment Plan (SIP):
A SIP allows you to invest regularly. You put in any amount at a preferred frequency (daily/weekly/monthly/quarterly/half yearly/,yearly) in a mutual fund scheme. Think of it this way - you want to pick up a reading habit. So, you either have a choice of:
1) Picking up a book, finishing it all at one go
2) You pick up a book and read a few pages every day/week/month - based on your choice and then eventually finish the book.
There is no right or wrong choice here, but if you want to gain knowledge consistently - starting small and reading consistently is a great option. The same goes with investing as well. If you have to pick up the habit of investing - SIPs are a great option since they help you stay consistent with your investments.
Key Takeaway:
The initial investment that is made by you in Module 1 is a lumpsum investment and not an SIP since you made a one-time investment.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
An Investor education and awareness initiative by Zerodha Mutual Fund.
