Right Time to Start Investing in Lumpsum and SIP

Deciding when to start investing can be tricky, especially when choosing between a lump sum and a Systematic Investment Plan (SIP) method of investing. But don't worry, we will break it down simply. Let us explore the right time to start investing in lump sum and SIP investments.

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SIP Benefits
Start SIP with as low as ₹1000
Start SIP with as low as ₹1000
No hidden charges
No hidden charges
Save upto ₹46,800 in Tax
Save upto ₹46,800 in Taxunder section 80 C
Zero LTCG Tax
Zero LTCG Tax^ (Unlike 10% in Mutual Funds)
Disciplined & worry-free investing
Disciplined & worry-free investing

  • Insurance Companies
  • Mutual Funds
Returns
Fund Name 3 Years 5 Years 10 Years
Top 200 Fund Tata AIA 23.15% 27.3%
19.47%
View Plan
Virtue II PNB Metlife 21.78% 23.76%
17.76%
View Plan
Pure Equity Birla Sun Life 18.83% 19.17%
16.34%
View Plan
Growth Opportunities Plus Fund Bharti AXA 17.85% 18.97%
15.65%
View Plan
Pure Stock Fund Bajaj Allianz 17.49% 18.39%
15.52%
View Plan
Blue Chip Fund HDFC Standard 14.09% 14.83%
12.85%
View Plan
Growth Super Fund Max Life 14.38% 15.26%
12.72%
View Plan
Multi Cap Growth Fund ICICI Prudential 15.63% 13.98%
12.51%
View Plan
Equity Fund SBI 14.73% 14.91%
12.42%
View Plan
Growth Plus Fund Canara HSBC Oriental Bank 12.78% 12.27%
10.7%
View Plan

Updated as of Jun 2024

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  Returns
Fund Name 5 Years 10 Years RSI
Active Fund QUANT 27.80% 23.96%
21.08%
Large and Mid Cap Fund QUANT 23.27% 22.69%
19.64%
Flexi Cap Fund PARAG PARIKH 23.90% 20.22%
20.15%
Large and Mid Cap Fund EDELWEISS 20.32% 18.01%
16.76%
Equity Opportunities Fund KOTAK 20.22% 18.98%
17.44%
Large and Midcap Fund MIRAE ASSET 21.11% 24.56%
23.01%
Flexi Cap Fund PGIM INDIA 21.48% -
15.13%
Flexi Cap Fund DSP 19.48% 17.73%
15.82%
Emerging Equities Fund CANARA ROBECO 18.91% 22.92%
20.84%
Focused fund SUNDARAM 18.22% 16.55%
15.16%

Updated as of June 2024

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What is Lumpsum Investment?

A lumpsum investment is a one-time, significant investment of money into a financial instrument. Unlike other investment strategies that involve regular contributions, a lumpsum investment involves putting a larger sum of money into the chosen investment option at the outset.

What is SIP?

SIP stands for Systematic Investment Plan. It's an investment strategy specifically designed for market-linked funds that allows you to invest fixed amounts of money at regular intervals (weekly, monthly, quarterly, etc.) instead of a single lump sum. You can also estimate your potential returns from an SIP investment through an online SIP calculator.

Lumpsum Vs SIP -

Particulars Lumpsum SIP
Investment Method Invest a single large amount at once Invest fixed small amounts regularly
Timing of Investment One-time investment Regular intervals (monthly, quarterly, etc.)
Risk Management Subject to market timing risk Reduces market timing risk through rupee-cost averaging
Market Volatility Vulnerable to market fluctuations Smoothes out market volatility over time
Potential Returns Depends on the choice and timing of investment and on market conditions. Depends on the timing of investment and market conditions
Flexibility Less flexible as it requires a large sum upfront More flexible as investments can be adjusted according to financial situation
Disciplined Saving It is not necessarily a disciplined saving approach Promotes disciplined saving habits
Psychological May induce psychological pressure during market fluctuations Helps in avoiding emotional decision-making due to regular investments
Suitability Suitable for investors with a lump sum amount Suitable for investors with regular income streams and smaller investable amounts
Cost Efficiency It may be more cost-effective in terms of transaction fees May incur lower transaction costs due to regular, smaller investments

How to Decide Between Lumpsum Vs SIP?

  • Lump Sum: Suitable for those with a longer investment horizon, high-risk tolerance, and confidence in market timing. It offers potential for higher returns but carries greater market risk.

  • SIP (Systematic Investment Plan): The best SIP plans are ideal for investors who want to develop a habit of saving and investing regularly and have a short-to-long term investment horizon. It provides rupee cost averaging, reducing the impact of market volatility.

Considerations:

Evaluate your investment horizon, risk tolerance, market conditions, and financial goals. Choose based on your individual circumstances and preferences. 

When is the Right Time to Start Investing in Lumpsum Vs SIP?

The right time to start investing in a lump sum or SIP depends on your financial goals, market conditions, and personal circumstances:

  1. When to consider Lump Sum investment:

    • If you have a lot of money saved up, you can invest it all at once.

    • When the stock market is down, you might want to invest a lump sum because you could get more for your money, and when the market bounces back, you will make more.

  2. When to consider SIP investment:

    • If you do not have a huge amount of money to invest right away, SIP investments let you put in smaller amounts regularly.

    • If you are worried about the ups and downs of the market, SIP spreads out your investment over time, so you do not have to worry as much about timing.

    • If you are saving for something far off, like retirement, the best SIP plans can be a good way to keep putting money away steadily.

Investment Options for Lumpsum and SIP Investments

The lumpsum and SIP are the commonly used approaches for various investment options, including:

  • ULIP Funds: You can buy the plan with a one-time investment or SIP and get the dual benefits of market-linked investments and life coverage.

  • Mutual funds: Investors can choose to invest a substantial amount or a small amount in a single mutual fund scheme.

  • Stocks: Lumpsum investments can buy a specific number of shares of a company all at once.

  • Bonds: A lumpsum investment can be used to purchase individual bonds or bond funds.

How Do You Start Investing in Lumpsum and SIP through Policybazaar?

Step 1- Sign Up: Go to Policybazaar's website or app and sign up for an account.

Step 2- KYC: Complete your KYC (Know Your Customer) process by providing your identity and address proofs.

Step 3- Choose Investment Type: Decide whether you want to invest a lump sum amount or through SIP.

Step 4- Select Funds: Explore the different market-linked investment funds available on Policybazaar and choose the ones that align with your investment goals and risk tolerance.

Step 5- Amount: For lump sum investment, decide how much money you want to invest. For SIP, determine the monthly investment amount.

Step 6- Set Up Payment: Link your bank account with Policybazaar for seamless transactions.

Step 7- Review and Confirm: Double-check all the details, including the selected funds and investment amount, before confirming the transaction.

Summing It Up

When it comes to investing in a lump sum or SIP, the best time depends on your goals, how much risk you are comfortable with, and what the market is like. Both methods have their pros and cons, so it is important to think about your own situation before deciding. Generally, starting sooner is better because it gives your money more time to grow.

FAQs

  • When to invest lumpsum in SIP?

    Consider investing a lump sum in a SIP when you have a significant amount to invest and want to spread it out over time to reduce market risk. However, if you believe the market is favourable, investing the lump sum directly might be preferable.
  • What is the best time to start SIP?

    Start a SIP as soon as possible to benefit from the power of compounding. Beginning early allows your investments to grow over time, regardless of market conditions.
  • Which is the best time to invest in mutual funds?

    There is no one "best" time to invest in mutual funds. Instead, focus on a systematic approach like SIPs to invest regularly and reduce the impact of market fluctuations.
  • Which time is best for SIP?

    The best time to invest in a SIP Plan is when you have a clear financial goal and a long-term investment horizon. Stay disciplined and invest consistently to benefit from potential growth over time.

+For Mutual Fund midcap category Returns https://www.morningstar.in/tools/mutual-fund-category-performance.aspx & for Insurance midcap fund category Returns- https://www.morningstar.in/tools/insurance-fund-category-performance.aspx
*Past 10 Year annualised returns as on 01-12-2023
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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