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Lump Sum vs SIP in Mutual Funds? There’s One Winner, and It’s Not What You Think.
What is the fuss?
You got your annual bonus or a job sign-on bonus. This is a lump sum of money. But where do you invest it?
Do you invest in your favourite mutual fund all at once or slowly over time through a SIP?
There can be many sources of lump sum money. It can be a project completion fee or deal-win cash. Or, just one fine day, you find a lot of money lying idle in your savings account.
While generic online advice says that SIPs are best and average out volatility, the actual best performer is different. By different, I mean they are lump sum investments most of the time.
While SIPs are a good way to form an investment habit and control your impulsive expenses, the story plays out differently when you have a large amount of money.
In this post, I discuss actual returns from Lump Sum vs. SIP in mutual funds, layout scenarios when lump sum investments give higher returns, and discuss a few situations when SIP becomes your best friend.
Let’s dive in.