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SIP or Lumpsum – Which One Should You Opt For?

SIP or Lumpsum – Which One Should You Opt For?

There are two investment methods for putting your money in mutual funds (MFs). You can either choose a Systematic Investment Plan (SIP) or invest a lump-sum amount in a scheme. SIPs enable you to invest in an MF scheme at periodic intervals, like half-yearly, quarterly, monthly, weekly or even daily.

And a lump-sum, as the name suggests, lets you make a one-time investment. Both routes allow you to take advantage of wealth creation through MFs. But, which one should you go for, SIP or Lump-sum? Well, there is no rule set in stone but you must contemplate some things before choosing one.

Factors to consider while investing

Any investment you make must align with your investment profile. This encompasses your risk tolerance, expenses and income. You also need to consider your financial goals such as retirement planning, paying off debt, saving for higher education, etc.

When trying to choose the ideal investment mode, you should keep the following factors in mind to make an informed decision.


A lump-sum investment is a great choice if you have a high-risk appetite with surplus funds at your disposal. In case you are uncertain about how to use this extra amount, investment in an MF at one go can prevent you from depleting it.

On the flip side, you should opt for a SIPif you earn a regular income but don’t have a substantial amount of cash up-front. This will not only ease up the burden of shelling out a huge sum but also inculcate a habit of disciplined investing.

Additional Read: Timed lump sums vs SIPs: What works better?

Market timing and knowledge

In a situation of upward stock market trends, you can generate relatively higher returns with a lump-sum investment method. However, volatile market cycles and ill-timed investment may also lead to losses.

A SIPscatters your investment over a certain time period, thereby reducing the risk. Thus, it offers decent returns even when the market is experiencing sharp fluctuations. If you’re just starting out with MFs, you should choose SIPs as it doesn’t require you to constantly time the market.

Type of fund

Equity funds are more susceptible to market risks. Ideally, you must go for a SIPwhile investing in an equity-oriented scheme. On the other hand, you can infuse a lump-sum amount when investing in a debt fund.

Your financial objective

If you aim at accumulating a big corpus for a long-term goal like retirement, you should start investing early in an equity MF through a SIP. One of the most common retirement planning mistakesthat people make is postponing investments. The earlier you start, the better.

Additional Read: How Much Should I Invest in SIP?

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