SIP v/s lump-sum, which is better?

What is SIP?

Systematic Investment plan (SIP) is a plan where investors make regular, equal payments into a mutual fund, and benefit from the long-term advantages of rupee-cost averaging and the convenience of saving regularly without taking any actions except the initial start of the SIP. 
As Rupee-cost averaging involves buying a fixed-dollar amount of a security regardless of its price, shares are bought at various prices, the average cost per share of the security decreases over time and the risk of investing a large amount of money into a security lessens.

Most important benefits of SIP:

Compounded Benefits – This states that if you begin with SIP early in life it gives you the power of compounding. Compounding of funds may lead to a massive difference in your savings over a long period of time. 
Easy to Operate and Maintain – SIPs prove to be quite hassle free as they come with easy payment options. You may either give post dated cheques for your fund or may give standing instructions to your bank to debit your account for a particular SIP amount on a particular date. 
Discipline and Regular Investments – SIPs help you in saving small amount from your earnings regularly thus bringing a discipline in your saving regime. It helps you being focused about the portion of investment on monthly or quarterly basis and also helps to increase your wealth in long term

What is Lumpsum?
A lump sum amount is defined as a single complete sum of money. A lump sum investment is of the entire amount at one go. For example, if an investor is willing to invest the entire amount available with him in a mutual fund, it will refer to as lump sum mutual fund investment Online
Lump sum investment is considered as one way of investing into mutual funds. The other method being that of systematic investment plan, popularly known as SIP. 

Differences Between SIP and Lump-sum
According to past data, ideally, if you have a time frame of 12 years or more, lump sum investing is a lot more beneficial. The chances of one earning negative returns is nil over any 12-year periods from 1980 till date, irrespective of which date one had invested a lump sum.

Rolling Returns(Daily) of CNX Nifty


5 Years
7 Years
10 Years
         12 Years
Probability of Negatie Returns
9.5%
7.5%
1%
0%

Furthermore we all are aware that compounding over the long time works better than in the short run. Hence, Lump sum is better in this regard. In rallying markets, it is likely that one can enjoy super high returns from your lump sum investments. 


But a single massive fall such as 2008, takes a lot of time for your fund to recover when you invest through a lump sum, as opposed to the SIP way of investing. 
For example, had you invested in Reliance Equity Opportunities on January 1, 2008 (just before the market slide that year), you would now be sitting on a healthy annual rate of return of 14 per cent. But had you started your Online SIP Investment on the same day in 2008 and continued till date, your returns would have been 23.5 per cent annually (IRR). 

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