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Whenever someone thinks of investing in a mutual fund, the first and biggest question that comes up is - "How to invest money? Little by little every month (SIP) or all at once (Lump sum)?" This question is as old as mutual funds themselves. Some people say that SIP is the safest, while some believe that a lump sum invested at the right time can make you much richer. But the truth is that both methods are right in their own places. Which method is best for you depends on your income, your goals, market conditions. Let's understand their advantages and disadvantages.

SIP means that on a fixed date every month, a fixed amount is deducted from your bank account and automatically invested in your chosen mutual fund scheme. You started a SIP of Rs 5,000 on the 5th of every month. Now on the 5th of every month, Rs 5,000 will be deducted from your account and invested in mutual funds.

Lumpsum means investing a large amount in a mutual fund scheme at one go. You got a bonus of Rs 2 lakh from the office and you invested the entire amount in a mutual fund at one go.

SIP is generally meant for employed people and all those who want to save a fixed amount every month. For them, SIP is considered a better way of investing.

It is considered better for those who have suddenly received a large amount (eg bonus, money received from selling property, inheritance) or who understand the timing of the market well.

The biggest magic of SIP is Rupee Cost Averaging. When the market is expensive (up), then you get fewer units of mutual fund for the same money. And when the market is cheap (down), then you get more units for the same money. In such a situation, in the long term, your cost of purchase gets averaged and the risk of market volatility is almost eliminated. A falling market is the best friend of SIP investors.

This is the best way to create a discipline of saving and investing. In this, you do not need to worry about the timing of the market at all. Whether the market is up or down, your investment continues. In this, you are likely to get a stable and good average return.

Investing money at the right time is the most important thing in this. If you invest money at the low level of the market, then you can earn much more profit than SIP. But, no expert in the world can tell with certainty when the market will come down. In such a situation, it can be like a gamble.

If your timing is right, Lumpsum can give you extraordinary returns. But if you invest money when the market was at its peak and after that the market fell, then it may take a very long time for your investment to recover.

Overall, SIP is for every common investor. If you are a working person and want to save every month, you are afraid of market risk and want to reduce it, you do not want to get into the hassle of market timing, you want to create a discipline of investment, then you can easily start SIP. This is the best, safe and effective way of investing in the market.

Lumpsum is good for those who are market experts or very lucky. If you have suddenly got a large amount of money, you understand the market well and you feel that the market is currently close to its lowest level, you are ready to take risk, then you can invest money through Lumpsum.

The best way is to let your regular SIP continue, and whenever there is a big fall in the market (like 10-15%), then take advantage of that opportunity and invest a little Lumpsum.