Mutual Fund SIP vs Lump Sum: Rs 6 lakh amount; 5 years of duration; which can give higher return in long term
Investors always try to opt for top-notch investment that gives higher returns in long term. Thus, let’s check out how much corpus can an investor accumulate in mutual fund systematic investment plan (SIP) and lump sum investment methods with Rs 6 lakh investment in 5 years.
One of the crucial questions that pop up in every mutual fund investor's mind is whether they should invest through systematic investment plan (SIP) or lump sum. While lump sum is a one-time investment in mutual funds, in SIP, money is invested periodically.
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(Disclaimer: Our calculations are projections and not investment advice. Do you own due diligence or consult an expert for financial planning)
What is Mutual fund SIP?
A systematic investment plan (SIP) is a regular investment scheme that allows its investors to build a corpus by investing a predetermined amount at set intervals.
What is lump sum investment?
A lump sum investment is a one-time investment. It has no systematic investments after that. Investors get returns on what they invest in the beginning. As the fund grows, the value of the net asset value (NAV) grows, and the value of lump sum investment also rises.
Difference between SIP and lump sum investment
With SIP investment, an investor doesn’t need to time the market as they purchase NAVs at different prices, so getting the benefit of rupee cost-averaging. In lump sum investment, the investor makes a one-time investment, so they need to be aware of the market situation as the investment can go down if the market slips.
Benefits of investing through SIP
SIP allows investors to buy more net asset value (NAV) when the market down and fewer when the market is high.
Benefits of investing through lump sum
Unlike SIP, lump sum investments don’t require a commitment to regular, fixed contributions. Investors have the flexibility to make one-time investments based on their financial capability. If the fund value rises, the lump sum investment will also rise. However, the lump sum investment is considered good for the long term.
How much corpus can SIP generate with Rs 6 lakh in 5 years?
Since our target is to invest Rs 6 lakh in 5 years, we are taking Rs 10,000 as the monthly SIP investment, which will be equal to Rs 1,20,000 a year, or Rs 6,00,000 in 5 years. With SIP investment of Rs 10,000 monthly, at 12 per cent annualised returns in 5 years, the estimated corpus will be Rs 8,24,864.
How much corpus can lump sum generate with Rs 6 lakh in 5 years?
With a lump sum investment of Rs 6 lakh, and at 12 per cent annualised returns, investors will get an estimated corpus of Rs 10,57,405.
How much return does SIP give in maturity period?
A systematic investment plan (SIP) will give estimated long term capital gains of Rs 2,24,864.
How much return does lump sum give in maturity period?
The lump sum investment gives estimated long term capital gains of Rs 4,57,405 in the 5-year time frame.
Which is better?
The choice between the mutual fund SIP and lump sum investments depends on an individual’s preferences and choices.