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sip vs lump sum: how to invest?

sip vs lump sum: how to invest?

sip or lump sum? compare sip with lump sum and check which is better form of investment and what are the advantages of sip over lump sum.
February 18, 2021
6 min read
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sip vs lump sum: how to invest

SIP vs Lump Sum: How to Invest

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equity market fluctuations are based on various macroeconomic, geopolitical factors, and even some news can hugely impact stock prices. it is thus almost impossible for an investor to time the market. moreover, emotions often lead to wrong buying decisions which can ultimately lead to wealth erosion. for most retail investors, a mutual fund has proved to be a great instrument through which they can create significant wealth over a long term investment horizon. while investing in mutual funds, investors often come across two choices - either to invest a lump sum or through sip. an investor should have a clear understanding of these two methodologies before putting in their hard-earned money into the equity market.

what is lumpsum investment?

lumpsum investment refers to on time investment in a particular mutual fund instrument. thus, if one has ₹ 1.2 lac at disposal, an investor can think of buying certain units of a mutual fund with this fund at one go.

what is sip?

sip stands for systematic investment plan. in this case, an investor decides to put a fixed sum of money every month or year and can leverage sip calculator. based on his financial goals and availability of funds over a particular period, he can invest periodically. so, in this case, an investor who is looking to invest ₹ 1.2 lac corpus for one year, can invest ₹ 10,000 each month at some predetermined date of each month.

which way to invest? sip or lumpsum?

as market dynamics are difficult to predict, sip offers several benefits over the lumpsum investment strategy. read on to find out the advantages of sip over lump sum: 

  1. brings investment discipline: through the sip way, investors can exercise discipline in their investment methodology. you can plan to build a corpus based on your long-term financial goals and estimate with help of the sip return calculator. this way, you will not get perturbed by market fluctuations and even market crashes. instead, you can embark on a systematic way of wealth creation.
  2. easy for beginners: for many retail investors, financial jargons are not too familiar. still, without much knowledge about capital markets, you can participate in this through mutual fund sips, where fund managers take up the job of managing the right portfolio for you.
  3. sips help in cost averaging: as the mutual fund navs fluctuate, investors do not need to be bothered. with the same amount of sip, you can get more units of the fund when the market is down, and get fewer units when nav is high. this way, you will be able to enjoy the benefits of rupee cost averaging through sips. investment risks are also mitigated against lumpsum investment, where some sudden market crash shortly after putting a large amount can erode wealth.
  4. enjoy the power of compounding: as the risks are mitigated through sips, the investors can still enjoy the power of compounding that equity instruments have to offer. with a 5-10 years investment horizon, you can use the mutual fund sip calculator to determine the wealth you can create through the counting power.


sips have a lot to offer when you are looking for a disciplined investment path. your goal may be creating a retirement corpus, buying a house or some other asset, or even a vacation. instead of trying to put all eggs in one basket at a time through a lump sum, systematic investments can help you achieve your financial targets despite bumpy stock market fluctuations over the short term. all you need to do is analyze and strategize your investment plans. so leverage cred’s systematic investment plan calculator and find your returns from the sip mutual fund investments.