Different ways to invest in Mutual Funds:
· Single Investment (Lump Sum Investment)
· Systematic Investment Plan (SIP),
· Systematic Transfer Plan (STP),
· Dividend Transfer Plan (DTP),
· Systematic Withdrawal Plan or SWP
These plans are intended to assist you in selecting the investment strategy that is most suitable for your investment and income objectives. Let's take a closer look at each one.
1.1 Single Investment (Lump Sum Investment)
Let's say you've managed to build up a fund and are now looking into ways to invest and make money or on the other hand you are a working professional and have been granted a decent reward this year and need to contribute it as opposed to spend it on a lavish get-away or a costly device you begin taking a gander at venture choices and conclude that shared assets offer a decent scope of plans to look over.
You determine your preferred level of risk, establish your investment objective, and begin evaluating individual schemes. When you have decided which schemes you want to participate in, you must decide whether or not to invest the entire corpus.
There are advantages and disadvantages to investing in a lump sum. If you buy at the right time, you could make a lot of money, but if you buy at the wrong time, you could also put your money at risk. It is essential for lump sum investors to have a long-term investment horizon and to invest in schemes with steady records in order to hedge against this.
1.2 Systematic Investment Plan (SIP)
This option is ideal for the majority of our country's working-class population, who earn a regular monthly income. An SIP is a boon for you if you don't have any savings but want to start building wealth for your future expenses. If you choose to invest in mutual funds through an SIP strategy, you can begin saving as little as Rs 500 per month.
Similar to a recurring deposit, which entails depositing a predetermined amount each month, this adds to your total capital and earns compound interest. In the SIP investment method, units are purchased based on the scheme's NAV on the day the installment is deposited. Because your funds are invested in the same scheme at different market levels, you can take advantage of rupee cost averaging. As a result, fewer units are purchased during high market conditions than during low market conditions.
1.3 Systematic Transfer Plan (STP)
A STP is designed specifically for you if you have a corpus of funds but do not wish to invest in a lump sum or SIP. By initially investing your funds in a less risky option and systematically transferring funds from this scheme to a high return scheme (such as equity) from the same fund house, an STP can assist you in consistently investing in stocks. They utilize the advantages of SIP by transferring a small amount to high-return schemes and the advantages of lump sum investing without the additional risks. It is the best of both worlds and, when used wisely, can assist you in achieving your financial goals. Plan to transfer dividends
The majority of investors are aware of a Dividend Reinvestment Plan (DRIP), under which the dividend payout is reinvested back into the scheme that generated it. A dividend transfer plan is similar to a DRIP in that it works, but its structure is slightly different.
1.4 Systematic Withdrawal Plan or SWP
Although this is more of a withdrawal mode than an investment one, as the name suggests, we felt it was important to mention because managing one's needs and expenses is the primary focus of investment.
Imagine this: you diligently save money and invest it throughout your life to build a solid nest egg. You will receive the planned payout at retirement and have a healthy corpus in your bank account. However, you are poor at budgeting and end up spending money on things that aren't necessary. Because of this, you run the risk of using up the entire corpus and eventually running out of money to invest or save. Not at all a pleasant thought.
If you invested through a broker or distributor, you can withdraw funds from mutual fund schemes. You can request a withdrawal by contacting your broker.
A mutual fund plan's withdrawal process is straight forward. There are numerous ways to exchange your cash.
2.1 With the Assistance of a Distributor or Broker
If you invested through a broker or distributor, you can withdraw funds from mutual fund schemes. You can request a withdrawal by contacting your broker. If you want to withdraw money offline, you must complete and submit a withdrawal request form. The form would be sent to the Asset Management Company by the broker. On the other hand, you can also redeem online if the broker provides an online service through a portal or mobile app.You can access your mutual fund account, select the option for withdrawal, enter the number of units you want to withdraw, and your request will be processed immediately.
2.2 Through the Company for Asset Management
With the AMC, you can redeem your mutual fund plan directly. You can request a withdrawal offline by going to an AMC branch office, or you can do it online. To seek retribution, all you need to do is visit the AMC's official website or download its mobile app.
2.3 With the Assistance of Transfer Agents and the Registrar
Through the R & T Agent, they can help you invest in mutual fund schemes and withdraw from them. You can get your money out of R&T Agents by making a withdrawal request in person or online.
2.4 Through Your Trading and Demat Account
You can also withdraw money from mutual fund schemes that you invested in with a Demat and trading account. Go into your account, select the amount you want to withdraw, and then submit your request to check your mutual fund investment. Once the request has been validated, the redemption will be handled and the funds credited to your associated bank account.
Mutual funds can be thought of as a pool of money from multiple investors. The corpus is then invested in bonds, stocks, and other asset classes as securities. SIPs and lump sum investments are two additional ways to invest in mutual funds. Depending on a number of factors, individuals can choose to invest through a systematic investment plan (SIP) or make a one-time payment.
Read on to learn more about these two approaches to investing.SIP and lump sum will also be compared in this article.
3.1 How Does a SIP Investment Work?
Before discussing the differences between SIP and lump sum mutual funds, it is essential to understand what a SIP is. A systematic investment plan, also known as a SIP, allows an investor to regularly allocate a small sum of money to their preferred mutual fund scheme. This is a methodical approach to regularly allocating predetermined sums of money, as the name suggests. This could happen every half-year, every quarter, every month, etc.
A fixed monthly amount is deducted from an individual's bank account when a systematic investment plan is activated. Therefore, investing consistently in this manner can make it easier to achieve one's financial objectives.
A systematic investment strategy allows people to spread out their investment over time, in contrast to a one-time lump sum. SIPs make it possible to start investing in MFs without having a lot of money. In turn, this aids in instilling a sense of financial responsibility over time.
3.2 What is an investment from Lumpsum?
With a lump sum investment, investors can put down all of their money at once to get the number of mutual fund units they want. When a fund's net asset value, or NAV, is lower, this method of investing tends to be more advantageous. A lower NAV enables individuals to acquire more units in this situation. A higher NAV, on the other hand, forces investors to buy fewer units.
Let's move on to the distinction between SIP and lump sum now that we've established the fundamental concept of the investment modes.
The Basis for Comparing
Need to Keep an Eye on the Market
Since they can enter various market cycles during their SIP tenure, investors should monitor market performance frequently
Because lump sum investments are typically made for the long term, investors do not need to keep an eye on the market.
Compared to the lump sum option, SIPs offer more flexibility when it comes to investing.
Investments in Lumpsum lack flexibility.
Response to Volatility in the Market
SIPs don't respond well to market volatility.
Investments in Lumpsum respond quickly.
Financial discipline training
As investors develop the habit of investing in a planned manner, this investment option has the potential to instill financial discipline in them.
Due to the fact that the investment is made in one go, it does not instill such discipline.
4.1 Which is Superior?
There are distinct advantages to lump-sum and SIP investments. Choosing between these two can be difficult for investors. Having said that, being aware of the differences between the two will assist one in making an informed choice.
The significant contrast between a lumpsum speculation and a Taste is the incomes. When making a one-time investment, people only allocate funds once. However, they regularly invest in a SIP.
A SIP is preferred by many individuals due to its emphasis on financial discipline. A lump sum investment, on the other hand, requires allotment of funds at once, so this is not the case.
In addition, individuals must take into account a few essential aspects when selecting an appropriate investment strategy. The type of fund, the amount that can be spent, investors' financial objectives, and investment goals are all examples of these factors.
This comparison of SIP and lump sum is now complete. When choosing one of these investment options, potential investors must take into account the aforementioned considerations.
Funds that are offered to customers directly by the AMC are known as direct mutual funds.AMC does not provide the broker who sells direct mutual funds with any incentives or commissions. Customers benefit from the savings as a result. Compared to standard mutual funds, this results in higher returns
5.1 Broker that sells mutual funds directly
Direct mutual funds are offered by a number of online stock brokers in India, including Zerodha, 5paisa, Groww, and Paytm Money. These brokers provide a mobile app and website for their exclusive direct mutual funds platform, Zerodha Coin. Zerodha is one broker that provides free mutual fund investment. A flat fee per transaction is charged by other brokers, such as 5paisa.
In India, Zerodha Coin is the best app for investing directly in mutual funds. There are no direct mutual funds offered by Upstox. Groww is one of the largest platforms for direct mutual fund investments.
5.2 The Best App for Direct Investment in Mutual Funds
Broker Fee for Demat Account Opening AMC Demat Account
Alice Blue Rs.0 Rs. 400
Tradeplus Rs.0 Rs. 0
Zerodha Rs.0 Rs. 300
Groww Rs.0 Rs. 0
5paisa Rs.0 Rs. 300
PayTM Rs.0 Rs. 0
For investors, mutual funds are one of the best investment options on the market. Every investor can choose from a variety of mutual funds, but before making a decision, they should consider their needs and risk tolerance.
An all-in-one or lump-sum investment SIP, or the systemic investment plan, Plan for Systematic Transfer, or STP.DTP, or the Dividend Transfer Plan,