The Core Difference
SIP (Systematic Investment Plan) means investing a fixed amount monthly. Lump Sum means investing a large amount all at once. Both have distinct advantages.
SIP — Benefits
- Rupee Cost Averaging: Buy more units when NAV is low, fewer when high — lowers average cost
- No market timing needed
- Builds discipline via auto-debit
- Start from ₹500/month
- Can be paused, stopped or increased anytime
Lump Sum — Benefits
- Full corpus earns returns from day one
- Better when markets have corrected 20–30%
- Ideal for deploying bonus/windfall
- Simple one-time transaction
Returns Comparison (Illustrative)
| Scenario | SIP ₹10K/mo × 10yr | Lump Sum ₹12L |
|---|---|---|
| 12% p.a. stable market | ~₹23.2 L | ~₹37.2 L |
| Volatile/falling market | Better (averaging) | Risky if entry at peak |
Best of Both: STP
Park lump sum in a Liquid Fund, then set up a Systematic Transfer Plan (STP) to move fixed amounts monthly to an equity fund — combines safety with averaging.
Our Verdict
For salaried individuals: SIP is ideal. For windfall/bonus with a long horizon: Lump sum or STP.
Disclaimer: Returns are illustrative. Actual returns vary. Not investment advice.