₹6,000 Monthly SIP vs ₹3 Lakh Lump Sum: Which Builds a Bigger Corpus in 5 Years?

Understanding SIP

A Systematic Investment Plan (SIP) allows you to invest a fixed amount in a mutual fund regularly, usually monthly. You can set up automatic deductions from your bank account, making investing disciplined and easy.

Understanding Lump Sum Investment

A lump sum investment is when you invest a large amount at once in a mutual fund. Your money starts earning returns immediately, which can grow faster if the market performs well.

SIP Example: ₹6,000 Monthly

• Monthly Investment: ₹6,000
• Assumed Annual Return: 12%
• Investment Period: 5 years

After 5 years:

• Total Investment: ₹3,60,000
• Estimated Gains: ₹1,34,918
• Total Corpus: ₹4,94,918

Lump Sum Example: ₹3 Lakh

• Investment Amount: ₹3,00,000
• Assumed Annual Return: 12%
• Investment Period: 5 years

After 5 years:

• Total Investment: ₹3,00,000
• Estimated Gains: ₹2,28,703
• Total Corpus: ₹5,28,703

Read More:What is 7-5-3-1 Rule in Mutual Fund SIP Investment?

Conclusion

While SIP helps in disciplined investing and reduces market timing risk, a lump sum investment can generate a slightly higher corpus over 5 years if invested during a favorable market. Both strategies have their advantages depending on your risk appetite and market conditions.

Investors can use a SIP calculator to predict the potential growth of their monthly investments and see how compounding can increase their returns over time.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities are subject to market risks. Read all related documents carefully before investing.