When to Use What? Many people mix up the two. Our team has put together some helpful points👇
1️⃣ Don’t force-fit one strategy into another
• If you have ₹10L today, spreading it over 12 months SIP mostly hurts than help over medium term
• If you are saving ₹1L/month, waiting to accumulate ₹6L for a lump sum is not smart — time in the market beats timing the market.
2️⃣Match the nature of the asset to the nature of the investment
• Lump sum works better with stable, compounding-style assets — like bonds, balanced funds, large-cap equity
• SIP works better with high-volatility, cyclical assets — like midcaps, smallcaps, sector funds.
3️⃣Horses for courses
• Don’t do lump sum into super-high valuation markets — the drawdowns can shake you.
Example:
Lump sum into Nifty Smallcap 250 in Jan 2018 → You saw 3 years of red.
• Don’t do SIP into a value trap — you’ll keep buying more of something that has inherent problems
Example:
SIP into PSU banks between 2013–2019 → Dead money for next few years.
4️⃣Your time horizon decides your strategy
• If your goal is less than 3 years away, avoid equity SIPs. Stick to lump sum in less volatile, decent valuation instruments.
• If your goal is 5–10 years away, equity SIPs help build exposure without regret from short-term volatility.
5️⃣Choose the strategy that suits your temperament
• Lump sum needs conviction. Can you see a 10% fall next week and still stay calm?
• SIP builds discipline. Can you keep investing for 2-3 years even when your portfolio is showing -12%?
