A one time investment is also called a lumpsum. You invest one time in a one off transaction.
A Systematic Investment Plan (SIP) can also be thought of as a series of one time investments, occurring monthly once. They can also happen quarterly or weekly.
Three main advantages of a SIP are:
- Can be setup in an automated manner. This helps you forget about when market is high or low and just keep investing.
- It is paperless and you don’t have to worry about forgetting to make the payment.
- Your investments average over time – you get more units when markets correct. Since the equity markets will grow over time, you benefit from compounding.
