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When it comes to mutual fund investing, one of the most common questions that arise is whether it’s better to invest through a Systematic Investment Plan (SIP) or make a one-time lump-sum investment. Both methods have benefits and risks, and the right choice depends on your financial situation, risk appetite, and investment goals.
In this blog, we’ll explore both options, compare their features, and break down their benefits and risks to help you make an informed decision.
What is SIP (Systematic Investment Plan)?
A Systematic Investment Plan (SIP) allows investors to invest a fixed amount of money at regular intervals, typically monthly. SIPs are popular because they make investing easy, disciplined, and affordable.
SIPs in mutual funds are gaining immense popularity in India, with 5.95 crore new SIPs registered between April 2024 and January 2025.
- Rupee Cost Averaging: When you invest a fixed amount regularly, you automatically buy more units when prices are low and fewer when prices are high. This helps balance out market ups and downs, reducing the impact of volatility.
- Discipline: SIPs foster a disciplined investment approach, where small, consistent contributions over time lead to significant financial growth.
- Lower Initial Investment: You don’t need a large lump sum to get started; SIPs allow you to start with small amounts, making them ideal for salaried individuals.
- Compounding Potential: As your returns get reinvested, they start generating their own returns. Over time, this compounding effect accelerates growth, making long-term investments more rewarding.
How ₹5,000/month SIP investment in a mutual fund grows over time with an assumed average annual return of 12%.
| Time Period | SIP Amount | Expected Average Annual Return | Total Amount Invested | Total Investment Corpus |
| 10 years | ₹5000 | 12% | ₹6 Lakhs | ₹11.61 Lakhs |
| 20 years | ₹5000 | 12% | ₹12 Lakhs | ₹45.99 Lakhs |
| 30 years | ₹5000 | 12% | ₹18 Lakhs | ₹1.76 Crore |
| 40 years | ₹5000 | 12% | ₹24 Lakhs | ₹5.94 Crore |
You Can Choose SIP If
- You’re a salaried individual with a steady income.
- You prefer regular investing without worrying about market timing.
- You’re a beginner looking to build your investment portfolio gradually.
What is Lump-Sum Investment?
Benefits of Lump-Sum Investment
- Single, One-Time Investment
A lump sum investment requires a one-time commitment of a significant amount, allowing your money to grow without the need for ongoing contributions. Make your investment and let it grow on its own. - Ideal for Extra Funds
Whether it’s a bonus, inheritance, or accumulated savings, lump-sum investment is an excellent option to put surplus funds to work. It can also provide a strong initial boost to your portfolio, helping it grow faster. - Immediate Growth Potential
Investing the full amount upfront allows your money to start compounding right away, maximizing returns without delays.
How ₹1 Lakh lumpsum investment in a mutual fund grows over time with an assumed average annual return of 12%.
Time Period | Lumpsum Amount Invested | Expected Average Annual Return | Total Amount Invested | Total Investment Corpus |
| 10 years | ₹1 Lakh | 12% | ₹1 Lakh | ₹3.10 Lakhs |
| 20 years | ₹1 Lakh | 12% | ₹1 Lakh | ₹9.64 Lakhs |
| 30 years | ₹1 Lakh | 12% | ₹1 Lakh | ₹29.95 Lakhs |
| 40 years | ₹1 Lakh | 12% | ₹1 Lakh | ₹93.05 Lakhs |
You Can Choose SIP If
- You have a large sum available for investment (e.g., bonus, inheritance, or savings).
- You’re comfortable with higher risk for potentially greater returns.
- You’ve researched the market and are ready to invest based on favorable conditions.
