When markets are high, SIP wins through rupee cost averaging — you automatically buy fewer units when prices are up and more when they dip. Lumpsum at market peaks can hurt badly.
Worked examples
Kavya, ₹1L lumpsum vs ₹8,333/month SIP for 12 months — which wins after 10 years?
Kavya invests ₹1L as lumpsum in January, her friend Meera splits it across 12 months as SIP. Both invest ₹1L total. At 12% p.a. in a rising market, Kavya's lumpsum grows to ₹3.1L. Meera's SIP grows to ₹2.8L — Kavya wins by ₹30,000. But if the market falls 25% in January and recovers over the year, Meera's SIP beats Kavya's by ₹40,000.
Frequently asked questions
Which is better for salaried employees — SIP or lumpsum?
SIP fits salaried investors naturally since investments match salary cycles. Lumpsum makes more sense for windfalls like bonuses or maturity proceeds.
Can I switch from SIP to lumpsum?
Yes. You can stop your SIP and invest any remaining amount as a lumpsum anytime. Or run both in parallel.
What happens to SIP when markets fall?
SIP actually benefits from market falls — you buy more units at lower prices. This is rupee cost averaging in action.