SIP or Lump Sum – which is the Best Way to Invest in Mutual Funds

SIP or Lump Sum – which is the Best Way to Invest in Mutual Funds

Mutual funds investments are becoming popular over the period of time, mutual funds schemes are receiving record-breaking investments’ year by year.

Since mutual funds plans are available for both small and large-scale investors, also investors can invest in mutual funds for short and long-term duration.

Although mutual funds are becoming more popular but still, there are many confusions about mutual fund plans and modes of investment. SIP and lump sum modes of investments are common modes of investment however many investors still have a lot of confusion about SIP and lump sum.

Today, in this article, we will cover both SIP and lump sum modes of investment briefly to clear common confusions regarding both modes of investment. 

SIP (Systematic investment plans) – 

SIP or Systematic investment plan of mutual funds allows you to invest in your desired mutual fund through small periodic installments, those installments can be monthly, quarterly or half-yearly.

Once you sign in through the SIP scheme, the installment will be deducted automatically from your bank account.   

You do not need a large amount of sum to begin your investments, this is one of the main plus points of SIP mode of investment, investors from all economic backgrounds can start their investments through SIP schemes.

Generally SIP investment is better for long-term investment, and you can fix your monthly installment as low as 500/- INR.

Lump sum 

This mode of investment is pretty common in financial markets, the word lump sum refers to large sum. Lump sum investments means investing a large amount of sum in one go without breaking down into installments, and it’s quite the opposite to SIP investments. 

This type of investment can be recommended to those investors who have large sums of money to invest or those investors who don’t want to break down investment amounts in small installments.

Since lump sum investment requires once investment  it is not recommended for small-scale investors, lump sum is ideal for those investors who have a large amount of free money to invest in a mutual fund in one go.

Also Check out the 10 Common Myths about Systematic Investment Plans in Mutual Funds

Comparison between SIP and lump sum

Market timing 

Market timing holds very much importance in lump sum investment since you are doing once bulk investment, in lump sum investment it is better to invest your money when the market is down.

Once you invest your money in downtrends, make it obvious that you will earn profit when the market will rise back to normal. Market timing is important in lump sum investment, while in SIP investment timing is not much significant.

Your investment is divided into small installments, so you invest the amount in small periodic installments, so you can enter a mutual fund without worrying about the current market trend.

In SIP investment rupee averaging works in the favor of investors which average the value of your total investment.    

Requirement of amount 

Requirement of amount is one of the most important factors in any investment, you can begin your investment in SIP schemes with minimal amounts of money.

In SIP investment you have to invest your money though periodic installments which can be as low as 500/- rupees per month. Basically, you do not need a bulk amount of money and large amounts of savings to begin your investment in mutual funds.

However, the requirement of the amount is quite different in lump sum mode, since you are doing once investment in lump sum mode, so you need to invest your entire amount in one time.

Basically, lump sum investment requires a large amount of money to begin your investment as compared to SIP investment. SIP investment is more suitable to small investors even students can begin their investment through SIP schemes.  

Average cost 

SIP can lead your overall investment amount to the best average cost, since you have to deposit your investment amount in small periodic installments that can be monthly, quarterly or half-yearly.

Investment via small installments gives your opportunity to invest your money in different cycles of the market which average your overall investment.

Investing your money in different market cycles provides you chances to enter at market lows which average to investment value at best price when the market rises you have a high probability to earn more profits.

Rupee cost averaging won’t work well in lump sum investment because you have to invest all your money at once, so you need to find one good chance to invest all your money. In lump sum investment you will not get multiple chances to average your overall investment. 

Financial discipline 

Financial discipline holds very much importance in your investment, financial discipline makes you a better investor in the future.

In SIP investments you have to deposit investment amounts periodically which bring financial discipline in your life.

Good financial discipline helps you to become a better investor in the future, however in lump sum mode improvement of financial discipline is not much possible.

If you focus on lump sum mode of investment you do not need regular financial discipline because you invest your entire investment amount in one time.      


After all the analysis you may have question SIP or lump sum which can provide better returns, well, there cannot be a simple answer because of their pros and cons. Both markets are market-oriented and both can be good as per about the investor.

If you are looking to invest your money in best market timing than lump sum can be good but if you want to invest for a long time to get good rupee cost averaging than SIP can be better. 

Team R Wealth

Team R Wealth

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