SIP vs Lump Sum
Got a lump sum to invest? See whether investing it all now or spreading it via a SIP builds more — and understand the risk trade-off.
Your numbers
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Lump sum (on the maths)
Investing all ₹12.00L now is expected to end about ₹4.81L ahead of spreading it as a ₹20.0K/month SIP — because money invested earlier compounds for longer. But a SIP lowers your risk if markets fall early, which this steady-return model doesn't reward.
Lump sum @ yr 5
₹21,14,810
SIP @ yr 5
₹16,33,393
⚖️ Rule of thumb: if you have the money now and can stomach volatility, lump sum usually wins. If you're nervous about timing or markets look frothy, a SIP buys peace of mind.
Corpus growth over time
SIP or lump sum — which is better?
If you already have a lump sum to invest, the maths is clear: investing it all at once usually beats spreading it via a SIP, because money invested earlier spends more time compounding. Over a rising market, "time in the market" beats "timing the market."
So why do SIPs get recommended so often? Because most people don't have a lump sum — they invest from monthly salary, and a SIP is simply the natural way to do that. And when you do have a lump sum, a SIP's real value is risk reduction, not higher returns.
The risk trade-off SIPs actually solve
A SIP spreads your buying across months, so you buy more units when prices are low and fewer when they're high — rupee-cost averaging. If the market falls right after you invest, a lump sum takes the full hit while a SIP keeps buying cheaper. That's real protection against bad timing.
The catch: markets rise more often than they fall, so on average the lump sum's head start wins. The SIP is essentially paying a small expected-return "premium" for insurance against a bad entry point.
How to choose
- Lump sum if: you have the money now, your horizon is long, and you can emotionally handle a near-term drop.
- SIP (or STP) if: markets look expensive, you're nervous about timing, or investing gradually helps you stay disciplined.
- A middle path: park the lump sum in a low-risk fund and use a Systematic Transfer Plan (STP) to move it into equity over 6–12 months — capturing some averaging without dragging it out for years.
Related tools
- Debt vs Invest — should that lump sum clear debt instead?
- EPF Calculator — the power of steady monthly investing over decades.
Frequently asked questions
Is lump sum better than SIP?
For a sum you already have, lump sum usually produces a higher expected return because it compounds for longer. A SIP's advantage is lower risk from a bad entry point, not higher expected returns.
When should I choose a SIP over a lump sum?
Choose a SIP (or STP) if markets look expensive, you're worried about timing, or investing gradually keeps you disciplined. It trades a little expected return for protection against bad timing.
What is a good middle path between SIP and lump sum?
Park the lump sum in a low-risk fund and use a Systematic Transfer Plan (STP) to shift it into equity over 6–12 months. You get some rupee-cost averaging without leaving money uninvested for years.
Does this calculator account for market volatility?
No — it assumes a steady return, under which lump sum always wins. Real markets fluctuate, which is exactly where a SIP's averaging benefit shows up. Treat the gap as the expected, average-case difference.