Why SIPs score over lump sum investments

Systematic Investment Plans (SIPs) are not magic. Their superiority to lump sum investments is a matter of probability or even psychology and not an absolute law. This means that most of the time, under most circumstances, over a sufficiently long period, SIPs will do better. To understand this, you just have to review what an SIP is and what it does. An SIP is an investment in a fund of a fixed amount at pre-defined intervals, generally monthly. SIPs neatly solve the two main problems that prevent investors from getting the best possible returns from mutual funds. These are: People focus on market timing i.e. they buy at the bottom and sell at peaks People invest at i

This article was originally published on March 15, 2022, and last updated on August 16, 2024.