SIP vs Lump Sum: Which is better?

The Great Debate: SIP or Lump Sum?

When investing in mutual funds, you have two primary options: Systematic Investment Plan (SIP) or a one-time Lump Sum investment.

Systematic Investment Plan (SIP)

Pros:

• Rupee Cost Averaging: You buy more units when markets are low and fewer when high, averaging out the cost.
• Discipline: Encourages regular saving habits.
• Low Entry: Start with as little as ₹500.

Cons:

• In a continuously rising market, you might miss out on lower entry points compared to a lump sum invested early.

Lump Sum Investment

Pros:

• Power of Compounding: Your entire capital starts working for you immediately.
• Ideal for Windfalls: Great for bonuses or inheritance.

Cons:

• Timing Risk: If you invest right before a market crash, your portfolio value drops significantly.

Verdict

• Choose SIP if you have a regular income and want to mitigate market volatility.
• Choose Lump Sum if you have a large surplus and a long-term horizon (5+ years).

Check returns with our SIP Calculator.