SIP or lumpsum: What is ideal for gold funds?

2 Mins read

Several people invest in mutual funds, but very few individuals focus on goal based investing. People of all genders are attracted to gold. If you as a child always wanted to own gold in large quantities, now you can do that too digitally. You can invest in gold as an asset class, but by saving yourself from all the hassles of owning and preserving physical gold.

The mutual fund industry has paved the way for so many possibilities that it is possible to seek capital appreciation by investing in sectors and industries which otherwise it would not have been possible. Today, it is possible to invest in your favorite yellow precious metal through mutual funds thanks to the introduction of gold funds. A gold fund is a mutual fund scheme which predominantly invests in gold reserves, gold bullion and in stocks that are associated with gold producing. They also invest in physical gold that is considered to has 99.5 percent purity and in gold mining companies that have great potential. 

Investing in gold via gold funds might be the smartest way to invest in gold as an asset because you get a chance to earn from a scheme that invests in gold without needing to personally buy the commodity in physical form. 

Should you make a lumpsum investment or start a SIP in gold funds?

If you are planning on investing in gold via gold funds you should be aware that there are multiple ways to invest. Retail investors can either make a one time lumpsum investment or they can opt for a systematic investment plan. Systematic Investment Plan (SIP) is an investment tool favored by most individuals who wish to invest in gold for a long term investment horizon. 

A lumpsum investment is what an investor invests right at the beginning of the investment cycle. Investors who have surplus money sitting idle in their savings account can consider making a lumpsum investment in gold funds. If you make a lumpsum investment when the markets are low and so is the fund’s NAV (net asset value), you will receive more units. Gold fund units are allotted to the investor in quantum with the investment sum and depending on the fund’s existing NAV. 

Although investors receive units in large quantities, their entire investment amount is exposed to volatility. A SIP on the other hand only exposes the amount that you invest every month to market volatility and not the entire investment amount. 

Here’s a table stating the differences between SIP and lumpsum:

Criteria SIP Lumpsum
Investment type Periodic intervals One time investment
Risk appetite Ideal for investors with low to medium risk appetite Should only be considered by investors with a high risk appetite
When to invest Anytime is a good time to start a SIP  Investors should take market conditions into consideration before making a lumpsum investment
Minimum investment Usually lesser than onetime lumpsum investment Higher than minimum monthly SIP sum
Investment horizon Ideal for investors with a long term investment horizon Ideal for investors who seek capital appreciation over the long term


SIPs are far more flexible as you can start or stop your SIPs midway without having to pay any penalty. You can even increase or decrease your monthly SIP sum to suit your income needs and to ensure that you are keeping all your investments aligned with your investment objective.