SIP vs Lump Sum: Which can generate higher corpus on Rs 20 lakh investment in 20 years?

SIP vs Lump Sum: In a Systematically Investent Plan (SIP), one can invest a fixed amount in a mutual fund scheme daily, weekly, monthly, quarterly, half-yearly, or yearly. In a lump sum investment, one makes a one-time investment and gets compound growth.

Shaghil Bilali | Dec 19, 2024, 07:15 PM IST

SIP vs Lump Sum: Mutual fund investors can invest in a mutual fund scheme through two ways: lump sum and systematic investment plan (SIP). All mutual funds allow lump sum investments. On the other hand, there are some funds, such as exchange-traded funds (ETFs), which may not allow SIP investments. In a lump sum, an investor can invest an amount in one go. While SIP allows periodic investments, where the investor can pick the investment cycle based on their income flow. Know more about SIP and lump sum and which of them can give a higher corpus on a Rs 20 lakh investment in 20 years.
Photos: Unsplash/Pixabay
(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)

1/14

Lump sum investment

Lump sum investment

Sometimes an investor can have a lump sum amount that they want to invest in one go. Such an amount may come from the salary bonus, business, inheritance, or any other source. Instead of keeping it in a bank account and spending it, an investor may want to park it in an investment scheme such as a mutual fund. They can do so through the lump sum method.

2/14

Is lump sum good for short or long term?

Is lump sum good for short or long term?

It can be good for either term, but the timing of making a lump sum investment will be the deciding factor for it. If one is investing when the share market is high, the lump sum investment may not give the desirable results in case the market falls. But if one is investing when the market is down, they can get a good capital gain once the market recovers. But the big problem is to identify whether the market is up or down.

3/14

What is minimum lump sum amount?

What is minimum lump sum amount?

Many mutual fund schemes allow lump sum investments as little as Rs 100. Others may allow Rs 500, Rs 1,000, or Rs 5,000 lump sum investments.

4/14

Example of lump sum investment

Example of lump sum investment

If one invests Rs 100,000 in a mutual fund scheme, where the rate of annualised return is 12 per cent, look at how their corpus may grow in 10, 20, and 30 years.

5/14

Example of lump sum investment

Example of lump sum investment

In 10 years, the expected corpus will be Rs 3,10,584.82. In 20 years, it will grow to Rs 3,10,584.82, while in 30 years, it will become Rs 29,95,992.21. 

6/14

SIP investment 

SIP investment 

In SIP, investors can invest daily, weekly, monthly, quarterly, half-yearly, or yearly. Depending on their income flow, they can select the investment period. They can increase or decrease the SIP amount as per their income flow. They can also stop an SIP and restart it. SIP can be a fixed amount, or one may opt for a step up SIP, where they can increase the investment amount every six months or a year. 

7/14

What's the right time to start SIP?

What's the right time to start SIP?

Many market experts say that one does not need to time the market for SIP investment. Since the price of a net asset value (NAV) of a mutual fund changes every day, the mutual fund investor buys it at different rates at different SIP investment cycles. Such differences in rates of SIP provide rupee cost averaging, where losses are likely to recover in the long run.

8/14

What's the minimum SIP investment?

What's the minimum SIP investment?

The minimum SIP investment in some scheme is Rs 100. However, most mutual fund schemes allow Rs 500 as the minimum SIP investment. 

9/14

Example of SIP investment

Example of SIP investment

An investor invests Rs 10,000 monthly in a mutual fund. Here's how much corpus they can create in 10, 20, and 30 years.

 

10/14

Example of SIP investment

Example of SIP investment

In 10 years, their investment will be Rs 12,00,000, and the expected corpus will be Rs 23,23,390.76.
In 20 years, the investment will be Rs 24,00,000, and the expected corpus will be Rs 99,91,479.19.
In 30 years, the investment will be Rs 36,00,000, and the estimated corpus will be Rs 3,52,99,137.74.

11/14

SIP vs Lump Sum: Where Rs 20 lakh investment may provide higher corpus in 15 years?

SIP vs Lump Sum: Where Rs 20 lakh investment may provide higher corpus in 15 years?

For our calculations, we will show an Rs 20 lakh lump sum investment and an Rs 8,333 monthly SIP investment for 20 years (which will be equal to Rs 1 lakh a year and Rs 20 lakh in 20 years).

12/14

What will be growth rate?

What will be growth rate?

In either case, we will calculate growth on the basis of a 12 per cent annualised return.

13/14

Corpus from lump sum investment in 20 years

Corpus from lump sum investment in 20 years

If one makes a Rs 20 lakh lump sum investment, their estimated capital gain in 20 years will be Rs 1,72,92,586, and the estimated corpus during that time will be Rs 1,92,92,586.

14/14

Corpus from SIP investment in 20 years

Corpus from SIP investment in 20 years

Since in SIP, one will invest Rs 8,333 a month, the expected capital gains in 20 years will be Rs 63,25,980, and the expected return will be Rs 83,25,900.

By accepting cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.

x