Rs 10,000 SIP vs Rs 12 Lakh Lump Sum: Which can create higher corpus in 10-year investment time frame? See details

Rs 10,000 SIP vs Rs 12 lakh Lump Sum: Investors with a large sum can invest in a mutual fund through lump sum, while those with fixed savings every month can invest through a systematic investment plan (SIP). Both get the benefit of compound returns.

ZeeBiz WebTeam | Jan 29, 2025, 02:08 PM IST

Rs 10,000 SIP vs Rs 12 lakh Lump Sum: In mutual fund investment, investors can invest through the lump sum method or systematic investment plan (SIP). While in a lump sum, investors can park their large amount in one go; SIP allows them to have a fixed amount of investment every investment cycle. Both provide the benefit of compound growth, where investments grow faster with time. Know how SIP and lump sum investments in mutual funds work, and which of the two—Rs 10,000 monthly SIP investment or Rs 12 lakh lump sum investment—can generate higher capital gains in 10 years. 
Photos: Unsplash/Pixabay
(Disclaimer: These are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)   

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What is lump sum investment?

What is lump sum investment?

A lump sum investment in a mutual fund scheme is a one-time investment, where the investor deposits the entire amount once. It benefits them to get compound returns on the entire sum. But if the market goes down, the loss is also on the whole amount.

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When is right time to start lump sum investment?

When is right time to start lump sum investment?

Unlike SIP, which can be started in any market condition, an investor needs to do proper market research before making a lump sum investment. It is considered that the lump sum investment should not be made when the market is high. But it is not easy to gauge whether the market will rise or fall from that point. So the lump sum investment can be made for a long term so that it absorbs market shocks easily. 

 

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What is minimum lump sum investment in mutual funds?

What is minimum lump sum investment in mutual funds?

Some funds offer Rs 100 as the minimum investment, but most funds offer either Rs 1,000 or Rs 5,000 as the minimum amount. 

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When is right time to withdraw lump sum investment?

When is right time to withdraw lump sum investment?

Every investment should be goal-orientated, so the best time to withdraw any investment is when you have achieved your financial goal. 

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Compound growth of lump sum investment

Compound growth of lump sum investment

The investor gets compound return on the entire amount. When an investor makes a lump sum investment, they buy all net asset value (NAV) units at the same price. So, the compound growth is equal in all NAVs.   

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What is SIP investment?

What is SIP investment?

In a SIP investment, an investor invests a fixed amount every investment cycle. They can choose the investment amount and cycle that are suitable for their earning cycle.

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What are different types of SIPs?

What are different types of SIPs?

An SIP can be daily, weekly, monthly, quarterly, biannually, or annually. All types of SIPs provide compound growth, but the number of compounding in a year will depend on their frequencies. 

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What are minimum and maximum SIP amounts?

What are minimum and maximum SIP amounts?

The minimum SIP amount in some mutual funds is Rs 100. However, most mutual funds offer a minimum SIP investment of Rs 500. There is no maximum limit.

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What's the maximum duration for SIP investment?

What's the maximum duration for SIP investment?

Most mutual funds offer SIPs for a maximum of 40 years. However, one can stop or restart an SIP in the same fund whenever they want. 

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Can SIP return be negative?

Can SIP return be negative?

Though one doesn't need to time market in an SIP investment and investors also get the benefit of rupee cost averaging, SIP returns can be negative. E.g., if someone starts their investment in a falling market and the market is slipping for a long time, the investor may get negative SIP returns, but the SIP investment is most likely to be positive in an investment horizon of 7-10 years.

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Story calculations

Story calculations

We will calculate returns from a Rs 10,000 monthly SIP investment for 10 years (an overall Rs 12 lakh investment) and on a Rs 12 lakh lump sum amount for the same period. In both cases, the expected annualised return will be 12 per cent.

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Return from Rs 10,000 monthly SIP investment in 10 years

Return from Rs 10,000 monthly SIP investment in 10 years

At 12 per cent annualised growth, expected capital gains will be Rs 11,23,391, and the expected corpus will be Rs 23,23,391.

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Return from Rs 12 lakh lump sum investment in 10 years

Return from Rs 12 lakh lump sum investment in 10 years

On a Rs 12 lakh investment, expected capital gains will be Rs 25,27,018, and the expected corpus will be Rs 37,27,018.

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Why is there huge difference in SIP and lump sum returns?

Why is there huge difference in SIP and lump sum returns?

The investment amount in both cases is the same, but the SIP investment is spread out in 120 instalments of Rs 10,000 each. However, in a lump sum, the investor is getting a return on the entire corpus from Day 1.

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