Why is a lump sum investment good?

Lump sum investment refers to investing a large sum of money all at once, as opposed to spreading out investments over time. There are a few key potential benefits to lump sum investing:

• Timing: Investing a large amount when stock prices are low allows you to maximise returns when the market eventually recovers. However, timing the market correctly is difficult.
• Goal Achievement: For short-term financial goals, investing a lump sum gets your money working towards your goal sooner. The shorter the investment horizon, the more beneficial lump sum investing can be.
• Simplicity and Discipline: Lump sum investing is a one-time decision, requiring discipline only at the time of investing, unlike SIPs, which require discipline month-after-month investments.

However, lump sum investing carries risks like market timing and a lack of rupee cost averaging. For most investors, especially those new to investing, SIPs are usually the safer approach.

Consult your financial advisor to decide if your specific financial situation and risk appetite make you suitable for lump sum investing. You may also use an online Lumpsum Calculator to estimate how your returns are likely to be.