Lump Sum or SIP: Which can create higher corpus on Rs 18 lakh and Rs 24 lakh investments in 20 years? See calculations to know
SIP is a simple and convenient method of mutual fund investment. In SIP, you need to invest a fixed amount at regular intervals. This can be daily, weekly, monthly, quarterly, half-yearly, and yearly.
There are many ways to grow your investment through mutual funds. In mutual funds, you can do lump sum or one-time investment as well as SIP too (systematic investment plan). Mutual fund investments are linked to markets therefore risks are also involved but the longer you invest, the more your money can get due to compounding benefits. Equity mutual funds have generated annual returns ranging from 12 to 15 per cent in the past.
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SIP or lumpsum?
However, many investors have questions about whether they should invest through SIP or lumpsum.
SIP vs lump sum investment
In this article, we will understand that between lump sum and SIP which one can give better returns in 15 years. But before that, let's know the difference between the two and their features.
What is SIP?
SIP is a simple and convenient method of mutual fund investment. In SIP, you need to invest a fixed amount at regular intervals. This can be daily, weekly, monthly, quarterly, half-yearly, and yearly.
What is a lump sum investment?
In lump sum mutual fund investment, you can invest an amount in one go and wait for your money to grow over a period of time.
Benefits of SIP and lump sum investment
Both SIP and lump sum investments are good and have their own benefits. Let's take a look at a few:
Rupee cost averaging
In SIP, mutual fund units are purchased over several market cycles, and the cost per unit is averaged across the investing period. Lumpsum investment is a one-time deal. The price of mutual fund units will vary according to the market cycle. As a result, the cost per unit does not average out.
Market fluctuation
Since SIP is done in regular intervals, you can enter the market anytime with SIP investments while in lump sum investment you need to be aware of markets and wait for the right time.
Market fluctuation
Since SIP is done in regular intervals, you can enter the market anytime with SIP investments while in lump sum investment you need to be aware of markets and wait for the right time.
Disciplined investor
SIP investments can make you a disciplined investor as you invest at a regular period while it is not the case in one-time investment.
SIP vs lump sum: Which one can give better returns in 20 years?
For instance, if you invest Rs 10,000 per month for 20 years, then you can get Rs 99,91,479 (Rs 99.9 lakh) on maturity in SIP, as per calculations. While in one-time investment you can get Rs 2,31,51,103 (Rs 2.3 crore) in 20 years.
What if you invest Rs 15,000/month in SIP or Rs 18 lakh in lump sum?
For instance, if you invest Rs 15,000 per month for 10 years, then you can get Rs 34,85,086 (Rs 34.9 lakh) on maturity in SIP, as per calculations. While in one-time investment you can get Rs 1,73,63,328 (Rs 1.7 crore) in 10 years.
Investing in mutual funds is subject to market risks. Consult your advisor before making any investment.