SIP vs Lump Sum: Which can generate higher corpus on Rs 15 lakh investment in 20 years?
One of the important questions that every investor has is whether to invest through SIP or Lump sum. In SIP one has to invest at regular intervals, it could be either daily, weekly, monthly, quarterly, half-yearly, or yearly. On the other hand in a lump sum investment, one has to pay the entire amount at once. Therefore, let’s find out which can generate higher corpus on Rs 15 lakh investment in 20 years.
Investors can invest in a mutual fund scheme in many ways but here we are talking about two ways: lump sum and systematic investment plan (SIP). 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. Therefore, let's understand more about SIP and lump sum and which of them can give a higher corpus on a Rs 15 lakh investment in 20 years.
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(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
What is lump sum investment
Lumpsum investments are one-time investments. The payment in lump sum investment is made in full at the beginning of the investment period.
What is SIP
A systematic investment plan (SIP) is a popular investment option that allows investors to invest a fixed amount in a mutual fund on a regular basis.
Difference between SIP and lump sum investment
In SIP investment, an investor doesn’t need to time the market as they purchase NAVs at different prices, 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 lump sum investment
Ideal for long term goal
The lump sum mode is generally convenient for individuals who want to invest a big sum.
Benefits of SIP investment
SIP allows investors to buy more net asset value (NAV) when the market is down and fewer when the market is high.
Flexibility
What is minimum lump sum investment amount?
In many mutual fund schemes, the investment amount starts from a small amount of Rs 100. But others may allow Rs 500, Rs 1,000, or Rs 5,000 for lump sum investments.
What is minimum amount for SIP investment?
The minimum SIP investment in some schemes is Rs 100. However, most mutual fund schemes allow Rs 500 as the minimum SIP investment.
SIP vs Lump Sum: Which can generate higher corpus on Rs 15 lakh investment in 20 years?
For our calculations, we will show a Rs 15 lakh lump sum investment and a Rs 6,250 monthly SIP investment for 20 years.
What will be annualised return?
In both cases, we will calculate on the basis of a 12 per cent annualised return.
What will be corpus from lump sum investment in 20 years?
If one makes a Rs 15 lakh lump sum investment, their estimated capital gain in 20 years will be Rs 1,29,69,440, and the estimated corpus during that time will be Rs 1,44,69,440.
What will be corpus from SIP investment in 20 years?
In SIP one will invest Rs 6,250, their estimated capital gain in 20 years will be Rs 47,44,674, and the estimated corpus during that time will be Rs 62,44,674.