Lumpsum investment vs SIP/DCA

If you're investing for the long term, time in the market beats timing the market. Invest the entire amount all at once, irrespective of market levels. Invest regularly if don't have lumpsum.

This is quite confusing to many people, since the finance world touts SIP (Dollar Cost Averaging in foreign terms) as the best way to invest.


SIP (Systematic Investment Plan)

One invests a fixed amount of money at a regular interval (daily / weekly / monthly / quarterly). In short, it is transfer of money from cash to a particular asset (mutual fund / direct equity called the DIY-SIP or other such names).

STP (Systematic Transfer Plan)

One switches/transfers from one mutual fund to another at regular interval, if the money is already with the AMC (asset management company). In other words, you just setup a transfer from one MF to another, most commonly this is done from liquid/short term funds into equity funds.


The investment of the whole lot of money into an asset.

Basic Guiding Principle: The overall average return of various asset classes vary. In the long term, the cash and cash-equivalents produce low but fixed returns, while the equity assets produce high returns with volatility (in most cases).

You have got 10 lakhs, and your investment horizon is >10 years. What should you do? So should you put your money in

  1. 10L in an equity fund (or equity-oriented hybrid fund) on day 0. OR

  2. Put your money in a short-term debt / liquid fund and start a STP into the equity fund at monthly (120 instalments) / yearly (10 instalments) intervals.

  3. Keep your money in your bank account and start SIP into the equity fund at 120 monthly / 10 yearly intervals.

You do not have 10L, but can invest at a rate of 8k per month (Total principal amount 10L, over 10 years). What should you do?** So should you, since lumpsum is better than SIP,

  1. Start putting your money into your account / liquid fund over all those 10 years, and then invest lumpsum at the end of 10 years, OR

  2. You should start putting the money directly into Equity as a regular SIP.

The answer is obviously 2, since you will not be missing out on all those 10 years of equity returns.

Should you split your single SIP into multiple SIPs?

This is just another form of 1. As we understand, Lumpsums tend to win more often than not as compared to SIP, it is better to put a single SIP at a comfortable time. By comfortable time, I mean that if you receive your salary on 5th, then set up your SIP date to 15th or so; this gives you flexibility when your salary will get delayed (it is almost inevitable that this will happen). The added advantage of a single SIP is that the paperwork of future capital gains tax calculations will be easier. Having weekly/daily SIPs will have hundreds of entries and calculations after a few years.


if you have money to invest for a long term, put that money into a diversified equity asset ASAP. If you have got lumpsum (eg, bonus money or tax refund), then invest lumpsum. If you have regular stream, then invest at a regular interval.

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