Mutual funds are one of the go-to investment options for modern investors, especially beginners, because of their relatively low-risk profile compared to other instruments. However, people who are starting their mutual fund investment for the first time are often confused about whether they should invest in mutual fund via SIP or the lump sum approach. 

Both routes to investing in mutual funds have their own advantages and disadvantages. If you are in a dilemma on which approach to take, read through this article for a better understanding of both. 

• SIP or Systematic Investment Plan: SIP or Systematic Investment Plan, as the name suggests, is a systematic way to invest in mutual funds where you invest a fixed amount of money on a regular basis, which can be monthly, quarterly, semi-annually or annually. Here are the benefits of investing in an SIP.
• Easy to start: For new investors, SIP investments are a great way to start. One can invest in SIP for as low as Rs.100 and eventually build up, depending on the income flow.  
• Builds a habit: For those who struggle to be consistent with saving money, SIP is a saviour. Investing in SIP builds a habit as the amount automatically gets deducted from your mutual fund app and gives you peace of mind. 
• Flexible & adjustable: SIPs are flexible and can be adjusted. If the amount that you regularly invest happens to change for some reason, you can adjust the amount for that month as per your needs. It is also easy to increase the amount, depending on your cash flow. 
• Less stress from market fluctuations: If you want to trade in mutual funds but want a low-risk option, SIPs are the best option for you. SIP returns are not heavily dependent on market conditions, as they average out the cost of investments. 

• Lump Sum Investment: Unlike SIP investment in mutual funds, where money is invested periodically, in a lump sum investment, a large amount of money is invested all at once. The returns on a lump sum investment depend upon how stock markets are performing. 

Benefits of investing in a lump sum mutual fund plan: 

• One-time investment: You don’t need to invest repeatedly for a lump sum investment. Just invest once, and you are done. Let your money work for you. 
• Suitable for surplus funds: If you have access to extra funds, maybe from an inheritance, a salary bonus or from your savings, you can invest it at once and generate returns from it. It will also help boost your portfolio. 
• No investment gaps: Since all the money is invested at once, there are no investment gaps. You can easily invest in lump sum mutual funds online with a mutual funds app. 
• Suitable for long-term investments: The way to invest in lump sum mutual funds is to invest a large amount of money and forget it for years. You can wait for the market to be in your favour to reap the benefits. 

Choosing the right type of mutual fund investment will also depend on your personal financial goals, risk tolerance and cash flow. Now that you have learned the benefits of both, assess your financial goals and pick the option that best suits your needs.