SIP vs Lump Sum: Which Investment Strategy is Best for Higher Returns?

• Lump sum investments generally yield higher returns in prolonged bull markets due to immediate, full capital deployment and compounding.
• SIPs (Systematic Investment Plans) often outperform in volatile or falling markets by leveraging rupee cost averaging, allowing investors to buy more units at lower prices.
• Timing the market bottom with a lump sum during sharp corrections can lead to significant gains, though this is difficult to achieve consistently.
• Short-term capital gains (STCG) tax (20%) can impact SIP withdrawals if units are redeemed before completing one year, affecting effective annualised returns.
• Systematic Transfer Plans (STP) offer a middle ground, allowing gradual deployment of lump sums from a liquid fund to equity, balancing risk and return.

Why It Matters: SIPs offer consistency and lower stress for long-term wealth building, while lump sums suit specific market opportunities.