Systematic investment plans (SIPs) and lumpsum investments remain two of the most popular routes for investing in equities. While both aim to build wealth, understanding the nuances of each approach can help investors optimise returns based on market conditions, risk appetite, and availability of funds.
Experts emphasise that SIPs and lumpsum are not mutually exclusive, but complementary.
Juzer Gabajiwala, Director at Ventura, explains, “SIP is an evergreen product. Even when markets are high and corrections are possible, SIP allows investors to continue building wealth. Lumpsum, on the other hand, works best when the market is expected to rise steadily and investors have a long-term horizon.”
How SIPs and lumpsum have performed
Historical data shows that market cycles significantly influence which strategy performs better.
Gabajiwala cites that between August 1, 2024, and July 31, 2025, the Nifty 50 TRI barely moved from 37,050 to 37,159. During this period, a monthly SIP would have generated an XIRR of 5.4%, while a lumpsum investment returned only 0.3%.
Conversely, in a strong upward market, lumpsum can outperform.
For example, a lumpsum invested on April 1, 2024, and held till August 31, 2025, when Nifty 50 TRI rose from 33,066 to 36,709, delivered a CAGR of 7.7% (as cited by Gabajiwala).
Mohit Bagdi, Head of Investment Research at MIRA Money, adds, “Bulls runs favour lumpsum investing, while bear runs and flat markets favour SIP investing. Equity market returns are largely a function of earning growth and the price paid. If you can time the market correctly, lumpsum works well; if not, SIPs reduce the risk of poor timing and improve rupee-cost averaging.”
When each strategy works best?
Experts note that the choice between SIP and lumpsum depends on market direction and fund availability:
- Lumpsum investing: Ideal if investors anticipate a market rally and have a large corpus ready. All funds participate in the upside immediately.
- SIP investing: Performs better during market volatility or corrections. By spreading investments over time, SIPs average out costs, buying more units when prices are lower. They are also suitable for those who don’t have a large corpus upfront.
Gabajiwala highlights, “SIP is an all-time market product. If the market falls, you buy more units; if it rises, profits are smaller but consistent. Lumpsum lacks this flexibility once invested.”
Deciding the right mix
For long-term investors, combining both approaches is recommended. SIPs should form the foundation of a portfolio, especially with a 10-15 year horizon across large, mid, and small-cap funds.
Lumpsum investments can be used to top up portfolios when funds are available, particularly during market dips.
Bagdi advises, “For new investors, start with SIPs to build discipline and reduce timing risk. For seasoned investors, a hybrid approach works best — deploy a portion as lumpsum and the rest through SIPs. This balances ‘time in the market’ benefits with reduced risk.”
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Illustrative example
Assuming an investor started a monthly SIP of ₹1,000 from March 2020 to August 2025, the total invested amount would be ₹66,000, generating an XIRR of 14.7%. In comparison, a lumpsum investment of ₹1 lakh over the same period delivered a CAGR of 16.6% (Source: ACE MF, cited by Gabajiwala).
This demonstrates that while lumpsum can outperform during extended bull markets, SIPs help navigate market turbulence and create disciplined investment habits.
To understand, both SIP and lumpsum strategies have their merits. The right choice depends on market expectations, risk tolerance, and investment horizon.
For most investors, a combination of both — leveraging the discipline of SIPs and the opportunistic timing of lumpsum — offers a balanced path to wealth creation.
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