SIP or lumpsum? Expert suggests best approach for first-time mutual fund investors with Rs 10,000

Starting your investment journey early is one of the most important financial decisions you can make. However, many first-time investors—especially students, interns and young professionals—often face a common dilemma: should they invest through a systematic investment plan (SIP) or opt for a lumpsum approach?

This confusion becomes even more relevant when the investment amount is modest, such as Rs 10,000. Choosing the right strategy at the beginning can help build discipline and set the foundation for long-term wealth creation.

Also Read | Which mutual fund should you add for 15 year SIPs? Expert breaks down multicap vs factor funds

The same is the case with an intern and a viewer of The Money Show on ET Now. She is confused about doing an SIP or a lump sum investment. She has accumulated some Rs 10,000 that she wants to invest, which is the first step of investment.

Addressing this query, financial expert Harshvardhan Roongta emphasised that beginning early, even with a small amount, is a strong positive step. “It is very nice in fact to see an intern look to invest whatever she has accumulated during her internship. It is a very positive step, and my congratulations to you for looking at starting your financial journey right from the internship,” the expert said.

He noted that for someone at the start of their investment journey, SIP is generally the more suitable route compared to lumpsum investing. He further cautioned to avoid lumpsum at this juncture.

According to him, SIP helps investors gradually enter the market and reduces the risk of investing all the money at once during volatile phases. For a beginner, this approach also builds financial discipline and removes the need to time the market.

For instance, instead of investing the entire Rs 10,000 in one go, an investor can spread the amount through an SIP of Rs 1,000 per month over 10 months. This ensures that the money gets deployed across different market levels, helping average out the cost of investment.

Roongta also suggested that beginners can consider starting with a simple and low-cost option such as an index fund, like those tracking the Sensex or similar benchmarks. Index funds offer broad market exposure and are easier to understand for new investors compared to actively managed funds.

“This is your first step into the markets, so please invest only via SIP. You can pick an index fund such an HDFC, BSE, Sensex index fund, to start this journey. You want to invest Rs 10,000. You can do an SIP of 1,000 for 10 months, so that will be your investment, the application that you will make with the AMC, the expert said.

He further highlighted the importance of staying invested for the long term. Since equity investments are market-linked and can be volatile in the short term, investors should ideally have a time horizon of at least 8–10 years to benefit from compounding and market growth.

Also Read | Nearly 176 debt funds offer returns over FDs in 2 years. Should investors rethink allocation?

The key takeaway for first-time investors is to focus less on timing the market and more on building a consistent investment habit. Starting with SIPs, even in small amounts, can go a long way in creating wealth over time while also helping investors navigate market ups and downs more effectively.

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

If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle.