Pramana Research Journal ISSN NO: 2249-2976
A COMPARATIVE STUDY ON ONE TIME INVESTMENT
AND SYSTEMATIC INVESTMENT PLANS IN MUTUAL
FUNDS- CONCEPTUAL STUDY
B. Kishori(1), M. Midhun(2)
(1,2)
Department of Management Studies
(1)
Assistant Professor, Anna University, Trichirappalli. Tamilnadu, India
(2)
PG Student, Anna University, Trichirappalli. Tamilnadu, India
ABSTRACT
The past few year Indian mutual funds receive a high range of popularity unit trust of
India (UTI) enjoyed a complete monopoly in the sector as it was the only entity to offer the
service now this mutual funds industry has entered the phase of consolidation and growth with
recent merger among different private sector fund houses .this paper is focused on the
comparative between one time investment that is lump sum investment and systematic investment
plan for this the present study analyses the returns of selected mutual funds schemes using
Sharpe ratio come with the conclusion which investment plan is best for investing in mutual
funds.
Keywords: Investment, Mutual funds, Lump sum, Systematic plan, Sharpe ratio
INTRODUCTION
A mutual fund is a kind of investment that uses money from investors to invest in stocks,
bonds or type of investment. Mutual funds are usually “open ended” that a new investors can
join into the fund at any time. The income earned through these investments is shared by its unit
holders in proportion to the number of units owned by them. There are two ways to invest in
mutual funds one is through one time investment that is annual lump sum payment and other is
systematic investment plan (sip). Lump sum investment is a onetime investment which is due for
one year if the investor has a huge disposable amount in hand and has a higher risk tolerance.
They may opt for a lump sum investment. Systematic investment plan is a investment in which
the investor will invest monthly. So we can make a comparative study of one time investment
and systematic investment plan and conclude which has more benefits.
INVESTMENT
An investment is possessions or item accomplished with the goal of generating earnings
or recognition. In a Monetary touch, an investment is the purchase of property that are not
exhaust today but are used in the future to generate wealth. In business, an investment is a fiscal
asset procured with the idea that the asset will provide revenue in the prospective or will later be
disposed at a higher price for a turnout.
Volume 9, Issue 5, 2019 397 https://pramanaresearch.org/
Pramana Research Journal ISSN NO: 2249-2976
MUTUAL FUND
A mutual fund is constitute when capital possessed from different capitalist is invested in
company shares, stocks or bonds. Common by thousands of investors (including you), a mutual
fund is driven concurrently to earn the highest probable returns. The person compelling this
investment vehicle is a qualified fund manager.
TYPES
Based on asset
Based on structure
Based on investment
objective
BASED ON STRUCTURE
Open ended
Close ended
Open ended
Open-ended funds are what you experience as a mutual fund. These funds do not
exchange in the open merchandise. They don’t have a restraint as to how many units they can
concern. The NAV revised daily because of market variations of the shares or stocks and bond
rate in the fund. Open-ended mutual fund units are buy and sell on need at their Net Asset Value
or NAV which is rely on the value of the fund’s basic securities and is valuated at the end of
every trading day. Investors bought units precisely from a fund. The investments of the open-
ended fund are estimated at the fair market value which is also the closing market value of listed
public securities. These funds also do not have a rigid maturity period.
Close ended
Closed Ended fund issues a rigid number of units that are marketed on the stock
exchange. It operates much more like an exchange-traded fund than a mutual fund. They are
started via NFO to increase money and then traded in the open market just like a stock. Though
the price of the fund is based on the NAV, the absolute price of the fund is impressed by supply
and demand as it is grants to trade at values above or below its absolute or real value. Hence,
closed-end funds can market at superior or discounts to their NAVs. Units of closed-end funds
are buy and sell by brokers. Closed mutual funds generally trade at discounts to their basic asset
value. These funds have a rigid maturity period.
Volume 9, Issue 5, 2019 398 https://pramanaresearch.org/
Pramana Research Journal ISSN NO: 2249-2976
BASED ON ASSET CLASS
Equity fund
Money market fund
Debt fund
Hybrid fund
Tax saving fund
Equity fund
These funds are lended in equity stock or shares of the companies. They grant high result,
that’s the sense they are desinged as a high-risk funds.
Money market fund
These funds are lender in dissolvable instruments, such as CPs, T-Bills etc. They are
designed as quite safe investment option, as you get an existing yet modest return on your
investment. They are a perfect opportunity for investors who need to invest their sufficient
funds
Debt fund
These assets are invested in the debt like government bonds, company debentures,
and fixed income assets. As they generate rigid returns, they are known to be a secure
investment instrument.
Hybrid fund
These types of assets are invested in different asset classes. There are occasions
when the fraction of debt is lower than equity; it could be alternative way around as well.
In this manner, return(s) and risk(s) drives a perfect balance
Tax saving fund
These funds make investment mainly in the equity shares. Tax-saving funds arrange
an investor eligible to demand tax deductions under the Income Tax Act. Risk factor
evolved in these funds is commonly on the higher side. At the same time, greater returns
are grants if the funds’ achievement is at par.
Volume 9, Issue 5, 2019 399 https://pramanaresearch.org/
Pramana Research Journal ISSN NO: 2249-2976
BASED ON INVESTMENT OBJECTIVE
Growth fund
Liquidity fund
Income fund
Growth fund
These schemes let investors lend their savings in equity stocks. The purpose behind
this is that it provides capital appreciation. Though these funds are examined to be risky,
they are investigated ideal for investors having an investment timeline that’s long-term.
Liquidity fund
The savings invested in liquid funds is invested mainly in short-term and at times,
very short-term investment instruments like CPs, T-Bills etc. with the sole objective of
providing liquidity. These schemes are minimum on the risk factor and they provide
modest returns on investment. These schemes are idle for investors having short-term
investment timelines
Income fund
These schemes let you invest your savings mainly in fixed-income instruments, such
as debentures, bonds etc. They deliver the purpose of providing proper income and capital
protection to the investors.
ONE TIME INVESTMENT PLAN
A lump sum amount is defined as a sole complete sum of money. A lump sum investment
is of the complete amount at one go.
Lump sum investment is investigated as one way of investing into mutual funds. The
other approach being that of systematic investment plan, popularly known as SIP. Usually lump
sum investments are ventured by big players and investors, in stocks especially those linked to
assets that are likely to acknowledge in the long term, making the investment beneficial except in
cases of high volatility.
SYSTEMATIC INVESTMENT PLAN
A definite amount is invested for a continuous period at regular intervals under this plan.
SIP is similar to a routine saving scheme like a recurring deposit. It is a approach of investing a
fixed sum regularly in a mutual fund. SIP grants the investor to bough units on a given date
every month. The investor determine the amount and also the mutual fund scheme. While the
Volume 9, Issue 5, 2019 400 https://pramanaresearch.org/
Pramana Research Journal ISSN NO: 2249-2976
investor's investment residues the same, more number of units can be bought in a refraining
market and less number of units in a rising market. The investor artistically participates in the
market swings once the option for SIP is made.
SIP assures averaging of rupee cost as rational investment ensures that average cost per
unit fits in the lower range of average market price. A capitalist can either allow postdated
cheques or ECS instruction and the investment will be made routinely in the mutual fund
determined for the required amount. SIP commonly starts at minimum amounts of Rs.1000/- per
month and upper limit for using an ECS is Rs.25000/- per instruction.
SIP OR ONE-TIME: HOW SHOULD INVEST?
One-time investment
In this method, you make a onetime payment of a appreciable sum of money.
SIP
On the various hand, in an SIP, a rigid amount of sum is deposited at regular intervals of time in
a mutual fund scheme. In short, one-time investment mode can be chosen if you have money in
hand right now that can be invested and an SIP can be chosen if you are expecting a regular
inflow of money in future.
KEY DIFFERENCE BETWEEN SIP AND ONE TIME INVESTMENT PLAN SIP
Periodic investments in a tenure
Earns better during market lows
SIPs can guard investments from liable market crash
ONE TIME INVESTMENT PLAN
One-time investment in a tenure (lump sum)
Earns better during market highs
One-time investments can direct to major loss during market crash, which happens often
enough.
Volume 9, Issue 5, 2019 401 https://pramanaresearch.org/
Pramana Research Journal ISSN NO: 2249-2976
CONCLUSION
On the basis of this study, I can conclude that Mutual Fund SIP is a monthly based investment
plan through which an investor could invest a fixed sum into mutual funds every month at pre-
decided dates. This barriers the investor from market instability and derives maximum benefit as
the investment is done at regular basis irrespective of market conditions. SIP is a feature
especially designed for investors who wish to invest small amounts on a regular basis to build
wealth over a long term. It inculcates the habit of regular savings and does not encourage timing
and speculation in the markets. The study would be helpful for the small investors by entering
into capital market by using the Systematic investment plan.
References
1. Joseph, G., Telma, M., and Romeo, A.(2015). “A study of sip & lip of selected large cap stocks
listed in nse”. International Journal of Management Research & Review, Vol.5, No.2, Art.No-8,
pp117-136
2. Juwairiya, P.P. (2014).“Systematic investment plan-the way to invest in mutual funds”. Sai
Om Journal of Commerce & Management, Vol.9, No1,pp. 2347-7563
3. Paul, T.(2012). “An assessment of gap between expectations and experiences of mutual fund
investors” International Journal of Marketing, Financial Services & Management Research,
Vol.1, No.7,pp-22773622.
4. Sharma, S.(2015). “ELSS Mutual Funds in India: Investor Perception and Satisfaction”,
International Journal of Finance and Accounting, 4(2): 131-139
5. Antonides, et al(1990) Individual expectations, risk perception and preferences in relation to
investment decision-making, Journal of Economic Psychology
6. Capon, et al (1992) Rationality and the Mutual Fund Purchase Decision, Journal of Financial
Services Research.
Volume 9, Issue 5, 2019 402 https://pramanaresearch.org/
