SIP or lumpsum: which should you use?

The difference is when the money goes in

A SIP takes a fixed amount from your bank every month and buys fund units at that day's price. A lumpsum invests the whole amount on one day. If the return is the same and positive, the lumpsum usually ends higher, because the full sum compounds from the start. A SIP's later instalments have fewer months left to grow.

That is a maths result, not a promise. Markets do not rise in a straight line. A lumpsum bought just before a fall spends the next year recovering. A SIP over that fall buys some units cheaper.

Use a lumpsum when the money is already spare

A bonus, a maturity, or cash sitting in a savings account has already left your monthly budget. Leaving it uninvested while you "wait for a dip" is its own decision, and the dip may not come. If you can leave the money alone for several years, investing it is the usual starting point. The lumpsum calculator shows what one amount grows to at a return you choose.

Use a SIP when the money arrives as salary

You cannot lumpsum next year's salary. A SIP matches income that comes in every month, and it removes the choice of which day to buy. That matters more than shaving a little off the long-run average. The SIP calculator also has a goal mode: tell it the corpus you want, and it solves for the monthly amount.

A large sum you are nervous to invest at once

Many people split it. Invest part today and move the rest from a liquid fund into the equity fund over six to twelve months. That is an STP, a scheduled transfer, not a different kind of return. Run the lumpsum calculator on the part you invest now, and the SIP calculator on the part you spread out, with the same return and the same end date. The two results together are a fairer picture than either one alone.

Neither calculator deducts capital-gains tax or exit load. Equity returns of 10–12% are a planning assumption, not a forecast.