Lump sum

A lump sum puts all the money into a fund at once. If you invest ₹2 lakh and the NAV that day is ₹40, you receive about 5,000 units, less a small stamp duty.

The alternative is a SIP, which invests a fixed amount at regular intervals. Both buy the same fund. They differ in timing:

• With a lump sum, the whole amount is exposed to the market from the first day. If prices rise after you invest, all of it gains; if they fall, all of it loses.
• With a SIP, the money goes in over months or years, so each instalment buys at a different price.

A third route spreads a lump sum over time. The money goes into a liquid or debt fund, and a fixed amount moves each month into an equity fund through an STP.

Each fund sets a minimum for a first purchase and for additional ones, usually between ₹100 and ₹5,000. Additional purchases can go into the same folio as an existing SIP.

SIP or lump sum compares how the two behave when markets rise and fall.