Level 2 · Module 2 · Products
SIP vs Lumpsum
Two ways to enter. One suits your salary; the other suits your bonus.
In this lesson
What you'll be able to do
- Explain rupee cost averaging
- Know when each approach fits
- Avoid stopping a SIP in a fall
Think about it
Markets fell 15% this month. Is your monthly SIP having a good month or a bad one?
Story
Let's picture it
Mechanically, a good one, the same ₹5,000 buys more units at lower prices. That's rupee cost averaging. Emotionally it feels terrible, which is why the most common SIP mistake is stopping exactly when it's working hardest.
Visual
Which fits when
SIP
Regular income · builds discipline · averages entry price
Lumpsum
One-time inflow like a bonus or maturity · full exposure immediately
STP
Park a lumpsum in a liquid fund and transfer gradually
Plain English
The simple explanation
A SIP invests a fixed amount at fixed intervals, so you buy more units when prices are low and fewer when high.
Lumpsum puts the whole amount to work immediately. Over long rising periods this often works out, but the timing risk is concentrated in one day.
An STP is a middle path: park in a liquid fund, transfer a fixed sum into equity each month.
Real world
March 2020
Investors who continued SIPs through the crash accumulated units at prices they'd not see again. Those who paused missed exactly those months. The mechanism only works if it keeps running.
Watch out
Common mistakes
- Stopping SIPs during a fall
- Starting a SIP with money needed next year
- Judging a SIP by one year's return
Did you know?
Monthly SIP contributions in India crossed ₹20,000 crore per month in recent years, a structural shift from the FD-only era.
Your turn
Mini challenge
Use the SIP calculator here with ₹2,000/month for 15 years. Then rerun it as ₹2,000 for 10 years. Compare.
Quick quiz
1 / 3
Wrap up
Summary
SIP suits salary and discipline; lumpsum suits windfalls; STP bridges the two. The worst move is stopping in a fall.
- SIP averages entry price
- Falls make SIPs more effective, not less
- STP smooths a lumpsum entry
Revise