Here are some Assumptions:
The loss in case of SIP is lower than Lump sum investment. So SIP wins in case of Constant Declining Market.
Both kind of investment gives good returns, but SIP would never be able to beat Lump Sum in case of Constant Rising Market. So Lump Sum wins in case of Constant Rising Market.
SIPs yield the best results if the market falls initially and recovers subsequently. The SIP investor gains because he gets to buy at lower levels.
If the market rises initially and then declines sharply, the SIP investor will suffer bigger losses than lump sum investor.
The SIP route works well in volatile market, especially if the market breaks out and rises. The lump sum investor would gain too but marginally.
If you check Sensex since 1988, you would find that markets are volatile most of the time and remains flat. So its good idea to invest through SIP. Whenever the market corrects sharply and becomes under valued, you should invest some amount in lump sum. This would give a kicker to your portfolio.
The question which should be preferable mode of investment in Mutual Fund – SIP or lump sum? The answer is it should not be SIP or lump sum but SIP and lump sum. Keep a regular SIP investment in MFs and top up your investment with lump sum when the market falls.
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Hi Amit,
It is nice to read your Blogs, i am also MF investor.
keep writing brother. Long way to go. All the best.
Regards,
CA DHARM RAJ MEENA
How would I know when the market is undervalued. Its so unpredictable.
I agree markets are unpredictable and you cannot time them. I would soon write a post regarding this.
I agree its a good strategy to do lumpsum when markets are down but SIP should continue throughout
Yes it is! Are you invested through SIP in MFs?