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What is difference between Lumpsum investment and SIP?

What are things I should consider to decide? Which is better?


There are two ways to invest in mutual funds:

1. SIP: Under Systematic Investment Plans (SIPs), the investor invests a specific sum of money at regular intervals. This specific amount is directly deducted from the investor’s bank account. It disregards the timing of the market.  

Advantages of SIP are:

• Investment discipline

• Mitigation of risk

• Flexibility 

• Hassle free

2. Lump Sum: These investments allow the investor to purchase the number of units he wants at one go. This method is usually chosen to create extra wealth and liquidity. Lump sum method makes use of the timing of the market strategy.

Advantages of Lump Sum are: 

• Investment of big amount

• Ideal for long term

• Convenient one time payment

Kavita Soni

The table below highlights the key difference between SIP and lump sum investment:


SIP stands for Systematic investment Plan.

Under SIP you invest regularly, usually monthly towards your investments. Example: investing Rs 5000 per month in Kotak Select Focus Fund.

When you invest lumpsum, you invest a large chunk in one shot. Example: you invest Rs 2L in the same fund.

Things to consider before you decide:

What is your need? If you have a large amount at your disposal then there is no option but to do lump sum. On the other hand, if you are salaried or have regular income you can automate your investments through SIP

Other factors to consider

  1. Market timing: When you are investing a lump sum, there is a risk of market volatility if you are investing in equity funds. SIP is distributed across time so risk of market volatility is low
  2. Equity or Debt: Considering the market volatility as mentioned in the above point, SIP is a better way to invest. For debt, lump sum vs sip does not matter.
  3. Discipline: One of the biggest benefits of SIP is to automate your investments. Many times because of our emotions (fear) or laziness, we dont invest regularly.


SIP- Systematic investment plan (SIP) is a method of investing in which a certain amount of your cash is invested periodically into mutual funds. The certain amount is decided by the user and as per the scheme of the mutual fund. Usually the mutual fund has the least amount that an investor can invest in SIP defined.

Lump sum investment on the other hand is a method of investment in which the investor invests the total money that he has kept for investment purposes in one go even before the start of investment period.

Which is better?

  • Before deciding which investment method to go for, one needs to see how much money a person can invest. If an investor has a regular income and is able to save some money, he can choose to invest in SIP. Else if an investor has a large sum of money, he can go for lump sum investment.
  • Two factors are important when investing: the amount of money invested and the duration of investment. The more the money invested for longer duration, the better it is, that is, higher the return
  • In SIP, you buy more when the market is down, and buy less when the market is good. and as a result you get a weighted average return over time
  • If the market grows continuously into the future, lump sum investment gives greater returns as compared to SIP. However in a volatile market, SIP is a safe investment.

Thus with lump sum investment, an investor is exposing himself to the vagaries of the market, as there is always a chance of mistiming the market. This risk is reduced with SIPs, because of investment discipline and it helps in averaging the cost without timing the market.

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Arpit Chandak

An investor can invest in mutual funds through SIP or Lump sum investments. But many investors are confused which is better investment. SIP and Lump sum both have their own merits and demerits.

SIP is a systematic way of investing your money in mutual funds. You can invest every month or quarter or year, it depends on the plan you have chosen.  It encourages investors to save money and in the end, they can redeem better returns.  The main advantage of SIP is that investors don’t have time to keep an eye on market and hence can pour in money into SIP. In SIP, one can also get the benefits of compounding i.e., you can reinvest the interest earned from the SIP. In the long run, it can make a huge positive impact on your returns.

A lump sum amount is a single complete sum of money. In this type of investment, you are investing the total amount at one go before the start of the investment period. This category is referred to as Lump sum mutual fund investment.

Investors should not give much time in taking decision of whether to invest in SIP or lump sum. Whether one opts for SIP or Lump sum depends on whether you have lump sum amount to invest in one go or not. In terms of returns, the higher the investment amount the better is for the investor. The more time you give to the investment, higher the amount accumulated due to effect of compounding.

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