SIP Or Lump Sum In MF: Which Works Better? Experts’ Insights Amid Market Volatility – News18

Last Updated:April 20, 2025, 15:33 IST

New investors face challenges in volatile markets. Expert suggests SIPs for managing volatility and lump sum investments during dips, with a mix of active and passive funds.

SIP Or Lump Sum In MF: New investors often face tough situations when starting to invest in the market. The turf becomes more difficult when it is full of volatility, making it harder to keep the tough mantle during ups and downs. Mutual funds work as helping financial instruments for new investors to invest regularly in the market without worrying about its nitty-gritty.

A dilemma among new investors often arises if they should go for SIPs or lump sum investments when choosing their mutual funds.

According to Shaily Gang, Head-Products at Tata Asset Management, both Systematic Investment Plans (SIPs) and lump sum investments have their merits.

Systematic Investment Plans (SIPs)

SIPs are beneficial in managing market volatility as they allow investors to invest at different times, thereby diversifying the risk associated with a single market level. This approach is particularly valuable during volatile market phases. Gang suggests that investors should consider increasing their SIP amounts in such times. SIPs help maintain discipline and prevent impulsive exits during market ups and downs.

Lump Sum Investments

Lump sum investments can also be advantageous, especially in times of market dips. For instance, if valuations are high or the market is volatile, reallocating to Hybrid funds like Balanced Advantage Funds can be beneficial. Gang said these funds adjust their equity exposure dynamically based on market conditions and macro indicators, giving professional managers the flexibility to make tactical decisions. This ensures that cash is available when needed, eliminating the need for investors to time the market themselves.

“Investors have experienced volatility across various time periods for e.g. global financial crisis, dot com bubble, Covid,” said Manish Mehta, Joint President & National Head Sales, at Kotak Mutual Fund.

In hindsight, he added, “All these volatile periods have given an opportunity to investors to either start their investment journey or add to their existing investment to average their costs.”

Active Vs. Passive Funds For New Investors

When it comes to choosing between active and passive (index) funds, Gang recommends a combination of both, depending on the portfolio’s role.

Core Portfolio

For the core part of the portfolio, diversification is key: – Largecap allocation can be split between active Largecap funds and Nifty 50 ETFs or Index funds.

Flexicap and Large & Midcap funds are better suited for active management due to the potential for varied sector and sub-segment opportunities.

Satellite Portfolio

In the satellite portion, both active and passive sector funds, such as those in Banking & Financial Services or Pharma & Healthcare, are recommended for further diversification.

These strategies can help new investors build a balanced and resilient portfolio, catering to different market conditions and investment goals.