SIP vs. Lumpsum: Which Makes More Money?
Lumpsum: Similar to a Bank Fixed Deposit (FD), it is a one-time investment. It is highly effective when market valuations are low [01:55]
SIP (Systematic Investment Plan): Similar to a Recurring Deposit (RD), it involves investing a fixed amount at regular intervals (monthly/quarterly) through auto-debit [01:06]
The Verdict: SIP is described as an “evergreen” product for long-term wealth creation. Lumpsum requires more timing and understanding of market valuations [02:44]
Duration of SIPs
There is no fixed duration; you can run an SIP for 1 year, 3 years, or longer based on your goals (e.g., travel plans or school fees) [03:31].
Asset Allocation based on time:
– 1-3 Years: Debt Funds [04:13]
– 3-5 Years: Balanced Funds [04:17]
– 5+ Years: Equity Funds [04:23]
What to do When the Market Falls?
Buy More: A market dip is seen as a “Golden Opportunity.” Just as people buy more gold when prices drop, investors should use dips to accumulate more mutual fund units [05:11].
Unit Accumulation: Wealth in mutual funds is built by accumulating units. When the market is down, the price per unit (NAV) is lower, allowing you to buy more with the same amount of money [05:46].
Real-world Example: During the COVID-19 crash, investors who stayed disciplined and invested saw their money double in just one and a half years [07:25].
What to do When the Market is at a High?
Continue your existing SIPs regardless of market highs [08:26].
For new lumpsum investments at high valuations, use an STP (Systematic Transfer Plan)—invest in a liquid fund and gradually transfer it into equity to mitigate risk [08:45].
Market wealth comes from “time in the market,” not “timing the market” [09:06].
Expected Returns
Equity Market Formula: Expected Return ≈ GDP Growth + Inflation + Alpha (Fund Manager’s extra performance).
In the Indian context (7% GDP + 4% Inflation + 1-2% Alpha), an investor can reasonably expect around 12% annual returns over the long term [09:51].
Debt Market: Returns are generally aligned with the 10-year G-Sec (Government Security) yields at the time of investment [10:25].
For more details, you can watch the video here
