Investors often face a dilemma about which is a better mode of Mutual Fund investment - Lump Sum or Systematic Investment Plans known as SIPs. An SIP allows an investor to invest a fixed amount of money at regular intervals. However, there may be situations when you would prefer to invest a lump sum.

Why don’t we start by understanding what is the basic difference between the two:

A lump sum is a single payment mode, while under the SIP mode of investing; a fixed amount is invested at fixed intervals of time which can be daily, monthly, quarterly or semi-annually in the MF portfolio of your choice. Let us take you through it with the help of an example;

Suppose you have Rs. 5 lacs in your bank account that you wish to invest in mutual fund scheme. To invest this, you could either: 

• Start a monthly SIP investment of an amount that you are comfortable with. This could be Rs. 10,000, Rs. 20,000 or Rs. 50,000. Let the money stay in your bank account till all of it gets invested systematically in the chosen equity funds.
• Invest the lump sum in Liquid funds. Then start a Systematic Transfer Plan (STP) from the debt fund to the ELSS. Your corpus will not only earn higher returns than a savings bank account, but also allow for systematic investment

But which method will be more beneficial for you?

It has been observed that when investments in SIP have been made in a growing market then the a lumpsum investment had provided more returns, whereas if the investments have been made the declining market – then the returns from SIP have displayed far more consistent results.

Hence, unless you a market wizard who knows which scheme to select and when, we wouldn’t recommend lumpsum investment. Some long-term funds you could certainly consider are:

Head to our “Mutual Fund Section”, which will provide you with a wide array of mutual funds to choose from based on your investment goals.