So you get an unexpected bonus, have surplus funds, or you've just completed a huge sale and have the cash sitting in your account – what do you do with it? Definitely not just remain there since it's just losing its value to inflation. But you also don’t want to go all-in on the latest hype stock and get burned in the process. You've probably heard of Systematic Investment Plans (SIPs) where you grow your wealth by adding small amounts of money to a fund at regular intervals over time. Sure, this increases your investment disciple and you get to benefit from cost averaging as opposed to timing the market. However, due to the smaller monthly instalments, the return over time may not be to your liking. What if you could put it all in at once and score better returns – especially in a bull market where you can ride it up? That's where lump sum investing comes in.
Get more from Compounding
Compared to the SIPs, lump sum investing enables you to accumulate more wealth over time. While the SIP gives you a means to save money coming in from your different sources of income, the smaller monthly instalments made in the product gives you a smaller return compared to the significant gains you would make by putting in the hefty lump sum at once and earning more through the compounded interest.
Taking Advantage of Market Corrections
During market dips, acquiring more units of selected financial products in lump sum will give you higher yields when the market resumes its uptrend. However, "timing the bottom" is not as easy as it sounds. Rather, one picks a comfortable entry point at which you can go all in and wait for the market to bounce back.
Don’t have time to keep watching market cycles? Wealth managers do it for a living, and parking your capital with them enables you to get higher returns with a portfolio that is tailored to your particular risk appetite. At Quigley Financial Brokers , income and gains are allowed to build up tax-free until every 8th anniversary on a gross roll-up basis. Talk to us and let’s make a financial plan that suits you.