Have Rs 4 lakh to invest? Here’s how to balance mutual fund SIP and lumpsum

Investors often face a common dilemma: should they stick to systematic investment plans (SIPs) or deploy lumpsum investments when they have surplus funds? While SIPs bring discipline and consistency, lumpsum investments can help take advantage of market corrections. Striking the right balance between the two becomes crucial, especially for long-term investors aiming to build wealth over 15–20 years.

A similar query came from Shivam, a 30-year-old investor and a viewer of The Money Show on ETNow, who has a 20-year horizon. With ongoing SIPs of Rs 25,000, a growing mutual fund portfolio, and plans to invest an additional Rs 4 lakh, his key concern is how to allocate this lump sum effectively and whether to continue with certain funds like his midcap exposure.

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He is investing Rs 10,000 every month in PPF and holds Rs 20 lakh. He has a lumpsum investment in Nippon Multicap and portfolio value is almost Rs 5,50,000. From the Rs 4 lakh he wants to invest, he want to allocate Rs 1 lakh in Nippon Multicap, Rs 1 lakh in Kotak Multicap, Rs 50,000 in Parag Parikh Flexicap, and Rs 50,000 in SBI Contra, 50-50 in midcap and small cap.

According to expert Samir Shah, at a time when many investors are hesitant due to uncertain market returns, Shivam’s approach stands out. Shah appreciated his mindset and said, “These days, many investors are concerned about market returns and prefer to stay out. But if you truly want to be a disciplined investor, this is actually the right time to invest. Shivam has understood this core principle and is increasing his investments, which is a very good approach.”

Midcap funds: Stay invested if risk appetite allows

Commenting on the question by Shivam whether he should continue investment or not in Motilal Oswal Midcap, Shah said if you are a long-term investor, and have a high risk appetite, in that situation you can continue with the Motilal Oswal Midcap Fund, as it is a concentrated midcap fund where they have invested into 25 to around 30 odd companies.

He further said that over the past six months to eight months you might have seen the lower return in the midcap category just because they have a higher exposure in the IT sector. The IT sector will definitely bounce back over a period of time but if your investment horizon is 20 years I am sure you should definitely continue with this fund and if we talk about the midcap category, it will definitely generate a higher than the midcap category average return over a period of time, Shah further said on the Motilal Oswal Midcap Fund.

SIP vs lumpsum: How to decide which one to choose?

The expert emphasize that SIP and lumpsum are not mutually exclusive strategies but complementary tools.

“SIP is a disciplined investment route and should be continued consistently. It helps average out market volatility over time, lumpsum investments, on the other hand, can be used tactically when markets are not in a good shape, or are going down, deploying additional funds through lumpsum investments can enhance overall returns,” he added.

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So if you have a surplus amount of money, markets are down, and if you have to decide a strategy, say like every 5% or 10% down you will increase your amount or will do lumpsum investment into your existing fund. So, this is the right time to invest into…, like lumpsum should be there so it can help you to maximise your return.

Avoid deploying lump sum in one go

While Shivam plans to invest Rs 4 lakh across multiple funds, Shah advises against investing the entire amount at once. Instead, a staggered approach is considered more effective.

He said that “the better approach is you should take a route of SIP where you can park your Rs 4 lakh into liquid fund and transfer amount whatever if you wanted to invest in four months, then divided by four like whatever amount Rs 4lakh so every month you can invest Rs 1 lakh rupees into equity, so transfer your liquid to equity.

For long-term investors, the focus should remain on discipline and strategy rather than timing the market. Continuing SIPs, using lumpsum investments during market dips, and adopting a phased investment approach can help optimise returns.

A balanced combination of consistency through SIPs and opportunistic lump sum investing can go a long way in building wealth over time.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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