Partner With Us NRI

Lumpsum vs SIP: Know the advantages

There are two ways to invest in a mutual fund scheme – a lump sum investment or a systematic investment plan (SIP). The lump sum investment consists of a single payment, while in the SIP a specific fixed amount is invested daily, monthly, quarterly or biannually, in your choice of mutual fund scheme/s. A lump sum investment requires you to invest of a considerable sum in equity, debt, fixed income and other such funds, depending on the objective and tenure of investment, and the risk you are willing to take.

If you are wondering which form of investment will give you better returns, it is important to understand the conditions of the market first. When the trend is upwards, the lump sum mode of mutual funds is more likely to offer higher returns. But, if the markets are falling or volatile, it is wiser to invest via SIP, which is more likely to be more lucrative in those conditions.

Advantages of SIP

Here are a few advantages of the Systematic Investment Plan

Rupee-Cost Averaging

During the rise and fall of markets, SIPs aids in spreading your investment over time. If you were to make a lump sum investment, your money would buy a lesser number of mutual fund units when the markets are up, and more when the markets are going downwards.  Hence, SIPs helps you lower the average cost of investment, while also reducing the risks. This is regarded as rupee-cost averaging.

Power of Compounding

SIPs helps you get the benefits of compounding since you are earning returns on the returns generated by the investment you made.

Less Stressful

SIP investments are less stressful, hence making it an ideal choice for people new to investing in mutual funds. Markets fluctuations can sometimes make you panic and withdraw your money, for fear of further loss, in case of a lump sum investment. This is less intense in the case of SIP because the money invested is spread across time.

Auto Transfer mode

When you set up SIP, you can also activate the auto-transfer mode. This way, you need not remember the exact date of investment. You can simply provide standing instructions to your bank to have the sums debited from your savings account, towards the SIP investment.

Ability to diversify

Since SIPs require small amount instalments; you can easily diversify your investment. You can invest in a number of different mutual funds through SIP, which further enables you to mitigate your risks. For instance, if you have ₹8,000 to spare each month, you can invest ₹2000 in 4 different SIPs and diversify your investment.

Benefits of Lump Sum Investing

Here’s how lump sum investments can prove beneficial

Investment of big amount

The lump sum mode of investment lets you invest a sizeable amount. Because of this, when the markets show an upward trend, the investment value also increases exponentially, as compared to SIP investments.

Ideal for long-term investment

The lump sum mode of investment is better suited to people who prefer to make long term investments. If you are making a lump sum investment, you can consider investment tenures of a decade or more. In case of a lump sum investment you can choose a suitable type of fund as per your need.


The lump sum mode is more convenient for people who have a large sum of money they wish to invest. Since you do not have to make the investment on a pre-determined date, you can invest the sums conveniently, whenever you have access to a lump sum amount.

Invest for the timing

Whenever you wish to make a long term investment, you should always look at the market timing closely. The best time to invest is when the market is already low, and is showing potential for growth. In this scenario, you are likely to earn greater returns through the lump sum mode. If you invest a lump sum amount when the market is already at a peak, you are more likely to incur a loss.

Final word:

As is apparent, there are equal benefits for SIP and lump sums investments alike. The former is ideal for new investors who have little savings, whereas the latter is for those who have adequate knowledge about the mutual fund world and decent sums to invest. It is always a good idea to begin with SIP investments and then, as you get comfortable, move to lump sums, if you so prefer.



Disclaimer: The contents herein mentioned are solely for informational purpose and shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.

Most Popular

  • 21 Jun 2022
  • ICICI Securities

Should you invest in Mutual Funds SIPs or FDs?

Choosing between a Systematic Investment Plan and a Fixed Deposit comes down to risk appetite and investment goal. Nevertheless, mutual fund SIP investments can be beneficial in many ways. This article will outline the difference between the two investment instruments and which one you should choose.

  • 21 Jun 2022
  • ICICI Securities

How to choose the best SIP investment?

Systematic Investment Plans (SIPs) are an option to make regular investments in mutual funds. Before heading to make an investment in SIP mutual funds, consider these factors to find the one that perfectly justifies your financial goals. 

  • 21 Jun 2022
  • ICICI Securities

How does long term capital gains tax impact you?

Certain assets, such as real estate and shares, attract long term capital gains (LTCG) tax. Here’s what you need to know about LTCG tax and how it can impact your finances.

  • 21 Jun 2022
  • ICICI Securities

Choosing between stock market and fixed deposit investments

Choosing the right investment option is critical for meeting personal financial goals. This article will highlight the difference between choosing stock market investments and fixed deposits—the aspects to consider, the risk-return profile, and what would fit into your portfolio.

  • 21 Jun 2022
  • ICICI Securities

Are Small-Cap funds good investments?

The best small-cap funds outperformed large-cap and mid-cap mutual funds last year. Now that the markets are turning bearish, is it a good idea to invest in small-cap mutual funds? Here’s an overview of these equity mutual funds to help you make an informed decision.

  • 17 Jun 2022
  • ICICI Securities

What Does the US Fed's Biggest Rate Hike Mean?

On 15th June 2022, the US Federal Reserve hiked interest rates by 75 basis points, the biggest hike since 1994. Why did it do so? What are its implications for India? Read on to find out more.

  • 15 Jun 2022
  • ICICI Securities

What is ESG investing and everything you need to know about it

In the last few years, since climate awareness and social justice have piqued people’s interest worldwide, ESG investment has increased. This article talks about ESG investing and the options available for ESG investment in India.

  • 15 Jun 2022
  • ICICI Securities

The Latest ESG Reporting and Framework in India

In May 2021, India introduced a new environment, social, and governance (ESG) guideline for the top 1,000 listed companies by market capitalisation. The Business Responsibility and Sustainability Report (BRSR) will be mandatory for these companies from FY 2022-23. Here’s what you should know about this ESG guideline.

  • 15 Jun 2022
  • ICICI Securities

Difference Between ESG and SRI Investing

When it comes to value investing, the two terms—ESG investing and SRI investing—are often confused. However, ESG investing strategies are different from SRI investing strategies. Read more to find out what sets the two apart and how you can decide which approach to adopt.

  • 14 Jun 2022
  • ICICI Securities

Four ways to ensure you leave your children a financial legacy

It is a moment of pride for parents to see their children earn their own money and lead a life with dignity. No words can express the joy to see your children grow, but how do you touch their life when you are gone? You can do that by leaving behind a financial legacy for your children to inherit. Here are four ways you can align your financial plan such that you leave behind something for your children.