Mutual Funds SIP Investment vs Lump Sum for Beginners - YouTube

Please press the bell icon while subscribing to get the notifications of the latest finance videos.

Hello my name is Mukul

And welcome to the 7th video of the Mutual Funds Series by Asset Yogi.

You can see the 6 videos that we have done earlier, I have numbered them also.

what are we going to talk about in this video

A big question comes to the mind of many people when they have to invest in Mutual Funds.

Should we invest in a Systematic Investment Plan or

will we get more returns by investing in lumpsum money that we have sometimes or SIP (Systematic Investment Plan)

And Often when you see advertisements for mutual funds,

There Systematic Investment Plan which is called SIP,

it is said that you will always get the benefit from it because there your cost becomes average.

We will discuss what are the advantages of a systematic investment plan

and what are the advantages of a lump sum investment plan

Along with it, we will also analyze data with the example of a mutual fund.

We will see its returns for the last 10 - 12 years

and we will look at when more returns have come in SIP and Lump Sum.

And if more returns have come in any case, then why have they come?

And after analyzing all this, we will make some strategies,

we will look at which type of investor should invest in SIP

and which type of investor should invest in Lump Sum.

This video is going to be very interesting so I hope you will stay till the end.

Friends, before the video, start let me tell you one more thing

If you want to invest in the stock markets and want to learn how to start investing in the stock market.

So you can follow our master investment series.

Which is free of cost, apart from this, if you need handholding to invest in the stock market,

then you can contact us on our WhatsApp number 92929 24848

Or you can also email us.

Firstly let us quickly understand what is the difference between a Systematic Investment Plan and a Lumpsum

Systematic Investment Plan that we call SIP in short.

If you keep investing some money every month in mutual funds So we call it SIP investment

That is if get your salary monthly and

you think that you should save and invest some money, So you can invest in SIP.

Another way of investment in mutual funds is lumpsum money

Suppose you got a bonus, or some stock options are available in the companies.

and you got some money from the sold property.

You may have inherited some money, and from there you got some money.

So if we invest such windfall gains in mutual funds then it is called Lumpsum Investment

Another way in Lump-sum investment is you can also save money every month

And when you get a chance or when you feel that the market is right, then you can invest the lump sum amount.

Now let's see some advantages and disadvantages of SIP and Lump Sum

SIP, in Systematic Investment Plan You can invest a very small amount

You can start investing from Rs 500

and the second advantage is that you don't have to time the market.

That is, you do not need to track the markets, Sensex, and the stock market.

You can invest money every month, If you keep investing every month,

then from here, our third profit turns out the market keeps going up and down,

your cost gets averaged

But since the cost is averaged, your returns too get average out

Somewhere its advantage is its disadvantage also.

And the fourth advantage is saving and investment becomes your habit.

We have seen the benefits of SIP, now what are the benefits of the lump sum

The first advantage is that when we get windfall gains

So we tend to spend that money as much as possible.

There's nothing wrong with spending some money.

But if you invest that money somewhere then that money can be multiplied

And another huge advantage of lumpsum is that if you time the market

If you make the entry right i.e. when the market is very low and it is at the bottom,

And that time if you invest you can get very good returns.

And we are going to analyze this with an example

I'll take you to the blackboard

We are going to analyze HDFC balanced advantage fund-Growth

this is not my favorite fund, I chose this because its history is very long.

So we can analyze 10-15 years,

Let us analyze its 10-15 year returns of it of SIP and lumpsum amount.

We will analyze the returns of 1 year, 3 years, 5 years, 10 years, 11 years, 12 years.

Let say on January 2, 2020, we sold all the units that we had.

suppose we bought it 3 or 5 years ago, so here the final selling time we took is 2 January 2020

Let say we invested one year ago on 2 January 2019

And suppose if we invested 1000 or 10,000 rupees every month In SIP.

So our annualized return is 8.68%. If we invested in a lump sum.

Let say on 2 January 2019 we invested ₹10,000 at a time or we invested 1 lakh at a time.

So its average return turns up to be 4.21% Now when we see returns of 3 years

So if you invested on 2 January 2017 the returns of SIP would be 7.99%

And the returns of the lump sum would be 11.26%, See it is reversed in both cases

Here in SIP, we are getting good returns of 8.68% in a year.

And in 2017 we are getting very good lumpsum returns of 11.26%

So why this difference is resulting, it is very important to analyze it.

Similarly, if you look at the 5 years so here too SIP is giving better returns

If we look at the 10 years return (11.3% and 10.81%) So there aren't big differences.

There is again a lot of difference in the returns of 11 years.

12% have come in SIP and 15.29% have come within the lump sum

and in 12 years again returns are reversed, SIP returns are good in 12 years at 12%

If we invested in a lump sum on 2 January 2008 then we get only 8% returns.

So my target ,that i circled out and it's very important to analyze them.

Here I like to analyze 11.9% properly,

So for this, we need to understand the marketing of this time.

I have plotted the chart of Sensex from 2006 to February 2020

And here we will look at the market, on 2 January 2020 the market was running at 40,700

Here I have taken a rough estimate and I didn't take exact decimal figures.

So the estimated figure of Sensex was 40,700 on 2 January 2020

Marketing was running at 36,200 on 2 January 2019.

The Sensex has given returns around 10% in a year, even more than 10%

But if you invested the money in the lump sum, then you only get only 4.21% returns

That means this fund can not beat the market.

That means this fund has invested some money in large-cap funds.

That means some money has shifted to other places also

i.e. mid-cap, small-cap companies

They have picked such companies who might not have given good returns

But we want to know why there is such a big difference in the return of three years and one year.

in one year SIP is giving good results and the lump sum is giving good results in 3 years.

So for this, we will look at the marketing of 2 January 2017.

Then marketing was running at 27,600. Here the market was at the bottom

Let us assume that from 2015 to 2017, if you see in 2015 the market was on the peak.

And from there the market has fallen.

On 2nd January 2015, the market was running at 29,200

And after 2 years the market was even below that.

If you look at 2016 that time the market had fallen very low

So at that point, you should have invested. If you were tracking the market even a little

If you can time and if you invested lump sum money at the bottom,

you can get very good returns. Let's analyze for the long run.

If we look at 2010, on 1 January 2010 the Marketing was running at 16,300.

Here the market has raised already. In 2009, the market was very low.

So from 2010, there was not much difference in the returns of SIP and lumpsum.

But if you had invested the money on 2 January 2009 when the market was at 9,400

You would have got a return of 15.29%. And these are great returns.

You get better returns from SIP, You would get around 3.15% more return every year

if you look at it in absolute money, then you will get to see a lot of difference.

Similarly in 2008 when the market was running High at 17,600

If you have invested that time then your returns would probably be very low

So in the systematic investment plan, your returns get averaged out

See the returns you will see 5 years,10 years, 11 years,12 year

This fund has given returns of 10-11% This means you can assume that

In the long run, this fund will keep giving you returns of 10 to 11%

But If you can track the market then Lumpsum Investment will be good for you.

So now if we want to make a strategy, which type of investor should invest where.

So here I will divide investors into two categories.

The first category is the investors who do not have time or knowledge and who cannot track the market.

So suppose if they have lump sum money or get windfall gains.

then put that money in a debt fund.

I have already done a video on what is the difference between Debt Funds and Equity Fund.

You must watch that video. I still summarise the debt-fund,

in debt funds you get fixed returns, your money is invested in government securities or

cooperative bonds deposits. there you get fixed returns.

So If you invest a small amount of money in a debt fund within the short term,

then you can invest that money gradually every month in the form of SIP.

Plus from your salary monthly, you can also invest some portion of it in the equities.

We have seen that in SIP, in the long run, both your costs and your return get averaged out.

But you will surely get to see more returns than FD when we talk about 8-10 years.

Now let's talk about the second category of investors.

Those who have time, who keep reading about the market,

if you can track the economy a little if you can understand some macro factors,

and if you can guess in which direction the economy is going,

Is Sensex about to fall or it get overpriced

So what should such investors do? They should accumulate capital firstly.

How will you accumulate capital? Suppose you get a monthly income

Even If the income is uneven, sometimes income is less, and sometimes it is more

or even if you are salary employed, you must have some savings every month,

you should invest that money in debt funds.

In SIP, keep investing some money in debt funds every month.

When you feel that the market is now at the bottom,

when the market falls, then that is a very good opportunity,

then you can invest lumpsum money in equities for long term

When the market is at the bottom, then you can get very good returns.

So my main motive for making this video was that we could bust a myth.

As people think that in SIP they will probably always get higher returns so it is not so

if you follow the market a little bit if you can understand in which direction

the economy is going, if you understood a few macro factors too

And if you invest money when the market goes down, you will always get good returns.

I have analyzed only one fund here, if you look at any fund and if you invest in that fund

when the market was at the bottom, you will see very good returns.

I hope you liked this video, then please like and share it with your friends

and family members, they may also be confused about where to invest in SIP or lump sum.

If you have any suggestions related to this channel or video,

Or if you want to suggest any topic for mutual fund series then you can tell us below

In the comment section, if you have not subscribed to the channel yet then subscribe now

And don't forget to press the bell icon so that you will get a notification of the latest video.

see you in the next informative video

till then keep learning, keep earning, and be happy as always