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Investing

SIP vs Lumpsum: Which Wins in a Falling Market?

Updated 20 August 2026

The honest answer is: it depends on what the market does after you invest, which nobody can predict — but the two approaches handle that uncertainty very differently.

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A lumpsum invests everything on day one. If the market rises steadily from there, a lumpsum wins outright, since all your money was earning returns the whole time. But if the market falls right after you invest, a lumpsum takes the full hit immediately.

A SIP spreads the same money across many purchase dates. If the market falls in the early months, your later instalments buy more units at lower prices — this is rupee-cost averaging, and it cushions the damage compared to a lumpsum that went in right before the drop.

In practice, most long-term equity market history shows a slight edge to lumpsum investing over very long horizons, simply because markets rise more often than they fall. But SIPs win on something lumpsum can't offer: they don't require you to have a large sum sitting around, and they remove the temptation (or anxiety) of trying to time when to invest it.

A practical middle ground many people use: invest a lumpsum gradually over 6-12 months using an STP (Systematic Transfer Plan) from a liquid fund into equity, rather than either going all-in on day one or trickling it in through a slow monthly SIP.

Frequently asked questions

What is a SIP calculator?

A SIP, or Systematic Investment Plan, calculator estimates the future value of a fixed sum invested every month into a mutual fund, based on an assumed rate of return and the investment duration. It helps you see how disciplined monthly investing compounds over time.

What is the SIP maturity formula?

The formula is FV = P × [((1+i)^n − 1) / i] × (1+i), where P is the monthly instalment, i is the monthly rate of return, and n is the total number of instalments. This accounts for each instalment compounding for a different length of time.

Why does the last instalment earn less than the first?

Because each SIP payment starts compounding only from the month it is invested, the very first instalment enjoys the full duration of growth while the final instalment barely has any time to compound. The total maturity value is the sum of all these differently-aged contributions.