Most people hear the same advice: “Bas invest karo!” But before choosing SIP, Lump Sum, or STP, it’s critical to understand how each actually works. As CA Nitin Kaushik bluntly puts it, “Your returns are NOT what you think they are—unless you factor in risk, tax, and inflation.” Let’s dive into what CA Kaushik calls the brutal truth of investing.
SIP (Systematic Investment Plan)
According to Kaushik, SIP is the most popular approach for salaried professionals and small business owners with steady cash flows. “You invest a fixed amount every month, which builds discipline and ensures rupee cost averaging,” he explains.
The beauty of SIPs lies in how they handle market volatility. “You automatically buy more units when prices fall and fewer when prices rise. Over the long run, this smoothens returns and removes timing stress,” says Kaushik.
He emphasizes that SIPs work best over 7–10 years or longer. “If you delay starting by even five years, your final corpus could drop by nearly half. That’s the cost of waiting,” he warns.
Lumpsum investment
Lump-sum investing involves deploying a large amount at once. Kaushik notes, “This works brilliantly if you already have capital ready and your goal is long-term. But the short-term risk is huge—if markets fall right after you invest, your portfolio value drops immediately.”
He points out that historical data supports the strategy: “Indian equity markets like the Nifty 50 have given 11–12% CAGR over 20 years. But in the short term, volatility can crush you.”
Kaushik advises using Lump Sum selectively—ideally during market corrections or when valuations look attractive. “It’s not for the faint-hearted, but the payoff is big if you stay invested long enough,” he says.
STP (Systematic Transfer Plan)
STP is less understood but very effective in volatile markets. Kaushik explains, “You park money in a safer fund, usually liquid or debt, and transfer fixed amounts into equity over time. It reduces entry risk and smoothens volatility.”
However, he cautions about tax implications. “Liquid fund returns are taxed at slab rate if held under three years, and at 20% with indexation beyond that. Plus, every transfer is a transaction, so reporting becomes more complex,” he notes.
The Forgotten Factor
Kaushik insists that most investors ignore the real enemy: inflation. “₹1 lakh in a fixed deposit at 6% gives you 4.2% after 30% tax. With 5% inflation, your real return is negative. You’re losing purchasing power without even realizing it,” he stresses.
According to him, true wealth is created only when post-tax returns consistently beat inflation. “That’s why equity-linked strategies usually outperform so-called safe FDs or savings options over the long term,” he adds.
How to choose
Kaushik offers a simple framework:
Short-term (
Medium-term (3–5 years): Opt for balanced or hybrid funds.
Long-term (7+ years): SIPs for steady growth, Lump Sum during dips, or STP for risk-managed entry.
Final takeaway
Kaushik sums it up bluntly: “SIP builds wealth gradually, Lump Sum compounds aggressively if timed well, and STP manages volatility. There is no universal best—only what fits your income flow, time horizon, and risk appetite.”
His closing reminder: “Always check post-tax, inflation-adjusted returns. Even safe FDs can make you poorer in real terms. The market rewards patience, not panic.”