SIP vs LumpSum which one and why??

[shk161]

Hi,

Suppose I am planning to invest in ELSS plans and i already have the money which i need to invest.

So should i go for SIP or Lump sum? I have heard people talking and suggesting about the lump sum? But i have few questions.


SIP would be great option if you don't have the funds readily available.Otherwise i would keep track of the market and as i see the fund is performing bad I will just invest at the right time and make some profits rather then going for SIP where you keep investing and you profit margins average to poor results.


Kindly help me understand the benefits of SIP in terms of returns and profit, not ethics,discipline in investing and others.


Thanks

 

[TracerBullet]

Hi,

Suppose I am planning to invest in ELSS plans and i already have the money which i need to invest.

So should i go for SIP or Lump sum? I have heard people talking and suggesting about the lump sum? But i have few questions.


SIP would be great option if you don't have the funds readily available.Otherwise i would keep track of the market and as i see the fund is performing bad I will just invest at the right time and make some profits rather then going for SIP where you keep investing and you profit margins average to poor results.


Kindly help me understand the benefits of SIP in terms of returns and profit, not ethics,discipline in investing and others.


Thanks

SIP is best way to do it emotion-free. Most people, when trying to time, will buy near top and sell near bottom. SIP helps to overcoming emotions and biases over medium term. If you then keep holding, you will get benefit of long term compounded growth. In addition short term gains within 1 year are taxable.

Best is to keep trading and investing separate. If you are proven expert in timing for a long term portfolio, then time it else stick to SIP.

Some things you can do to mix with SIP
1) Have some target debt-equity allocation. Use that as a way of rebalancing / timing and do this say once a year
2) If you are following market daily, you can try to time your monthly SIP quota, invest whenever there is decent fall in that month. But make sure not to put it off for next month if there is no fall.
3) Have some rainy day money ready ( or use some spare money from DEBT) When we get a long term fall of say 10-20-30 % invest on capitulation when fear is strong in market. Invest when you get big climax WRB bar after extended move and midcaps start collapsing ( even after having already fallen in the extended bear move). Here you are trying to buy on fall climax. This is in addition to SIP. Example Nifty 8k/7.6k/7k in last fall, ~14k sensex many years ago during europe crisis etc.

 

[shk161]

But if I can still time it isnt that good? I am not saying will be buying at the lowest but yeah when it goes little lower just as the safest option .


The problem with SIP is that we need to keep tracking and also the units bought will get locked for next 3 years suppose i start SIP by 2016 August the units will be locked for August 2019 but only the units bought in august anything bought later suppose in january 2019 will be locked till january 2021.Not many people realize this...specially the new ones....


So i think there is FAYDA and NUKSAN in both lumpsum and SIP scheme

 

[TracerBullet]

But if I can still time it isnt that good? I am not saying will be buying at the lowest but yeah when it goes little lower just as the safest option .


The problem with SIP is that we need to keep tracking and also the units bought will get locked for next 3 years suppose i start SIP by 2016 August the units will be locked for August 2019 but only the units bought in august anything bought later suppose in january 2019 will be locked till january 2021.Not many people realize this...specially the new ones....


So i think there is FAYDA and NUKSAN in both lumpsum and SIP scheme

Loss hogaya yaar aaj TAGDA
Mutual Funds Add | SIP | Edit 116,000 -1,694 (-1.32%) 11,029 (9.51%) 127,029

1) i read few of your other threads - Do not treat Equity MF as short term investments. 1 day / month / year returns dont matter. You cannot 'target' 20% in next 6 months. This is out of your control and probably out of MF control too as broad index can do anything.

2) How do you know that you can time it ? How much lower? what if i keeps going even lower after you invest? I doubt this looking at you reaction in above post from another thread.

Trading and investments are separate. Trading uses leverage and needs tighter risk management. MF Investment is more hands free, there is no stop and generally we want to gain from long term growth - 5- 10 years and more. If, as you say, you can time it then just pick individual market leading stocks.

3) If you are investing for 10 years, this does not matter. Yes some part of ELSS will get locked for upto 4 years instead of 3. But anyway, you can keep reusing same funds for ELSS and invest rest in diversified Equity.

Advantage of SIP is emotion free investing. It is not fool proof, but you have better chance to get decent average price.
But since you seem to be unconvinced, you can time and invest in lump sum. Just do realize it carries additional risk ( and maybe reward) over shorter timeframe and carries some mental hazards. Maybe it will be good learning that way. good luck

 

[shk161]

1) i read few of your other threads - Do not treat Equity MF as short term investments. 1 day / month / year returns dont matter. You cannot 'target' 20% in next 6 months. This is out of your control and probably out of MF control too as broad index can do anything.

2) How do you know that you can time it ? How much lower? what if i keeps going even lower after you invest? I doubt this looking at you reaction in above post from another thread.

Trading and investments are separate. Trading uses leverage and needs tighter risk management. MF Investment is more hands free, there is no stop and generally we want to gain from long term growth - 5- 10 years and more. If, as you say, you can time it then just pick individual market leading stocks.

3) If you are investing for 10 years, this does not matter. Yes some part of ELSS will get locked for upto 4 years instead of 3. But anyway, you can keep reusing same funds for ELSS and invest rest in diversified Equity.

Advantage of SIP is emotion free investing. It is not fool proof, but you have better chance to get decent average price.
But since you seem to be unconvinced, you can time and invest in lump sum. Just do realize it carries additional risk ( and maybe reward) over shorter timeframe and carries some mental hazards. Maybe it will be good learning that way. good luck

Thank you for going through my other posts :thumb:

1) Actually am not expecting quick returns from ELSS MF ,but just gets excited if I see some profits I know have to wait atleast 3-4 years to get some fruitful returns.

2)Actually have never done this earlier and am not sure if i can time it right but definitely I can for now judge a bit that if the market goes down it will certainly come up some day.So I will buy at lower and if it goes more lower I will buy more on some particular MF's and keeping in mind about the loss I can bear

Can you please tell more about individual market leading stocks? you mean investment directly into stocks? which requires more analysis and experience ?

3)Yeah am not worried much about it but the only thing is you definetly wants to come out of the MF and stop the SIP if it continously goes down so when the units are locked and the MF performing bad there is really not much we can do if it is in lock in period. And honestly we cant help it,so am not complaining but just bringing to notice of other new people like me.

I am convinced but was just trying to think from other perspective too.I am not a expert but a expert might time it well and generates loads of profit for himself . But some day I would also gain that experience... in the process of being good at investing.

Once again wanna thank you for responding to my posts.:clapping:

 

[TracerBullet]

2)Actually have never done this earlier and am not sure if i can time it right but definitely I can for now judge a bit that if the market goes down it will certainly come up some day.So I will buy at lower and if it goes more lower I will buy more on some particular MF's and keeping in mind about the loss I can bear

Your 1st statement implies that you cannot judge it but are willing to gamble until some loss that you cannot bear. If your outlook is 10+ year in a diversified Mutual Fund, none of this matter, you dont have any maxmimum loss. Be a bit optimist and invest through market cycles as India is growing country.

Why are you against SIP? Markets have run up, what will happen in future i dont know as market tries to look ahead. If you want, put say 25-50% now ( or with your timing method) and rest do SIP over 2-3 years ( or even better do it continously). For ELSS, ofcourse you can invest upto limit and continue next year.

Can you please tell more about individual market leading stocks? you mean investment directly into stocks? which requires more analysis and experience ?

Leave it for now. Maybe in future you can try with smaller capital.

3)Yeah am not worried much about it but the only thing is you definetly wants to come out of the MF and stop the SIP if it continously goes down so when the units are locked and the MF performing bad there is really not much we can do if it is in lock in period. And honestly we cant help it,so am not complaining but just bringing to notice of other new people like me.

This is exactly what you dont want to do and why SIP helps you overcome these emotions. If your investment is for 10+ years dont look into this. You will sell when you cannot bear the pain, market will make bottom and then go on without you. Just be careful if we get into bubble manias. Mutual Funds cannot magically go up if markets are falling a MF does not become bad if it falls.

I think best is for you to read some good websites like value research, fundsindia blog etc. Simplest way for most people is to do SIP in Diversified Equity MF and then forget about it. If you want more than MF, then read appropriate books that interest you.

 

[masonicinvestor]

Might seem rude but, MF and SIP are for amateurs and direct investment in lump sum is for pros.

 

[shk161]

Might seem rude but, MF and SIP are for amateurs and direct investment in lump sum is for pros.

LOL amateurs to pros the journey goes on :clapping:

Kyonki saas bhi kabhi bahu thi