₹12 Lakhs Invested Lumpsum or SIP – Which Will Give Higher Returns? Knowing This Can Help You Gain ₹14 Lakhs More

When it comes to investing, many investors are often curious whether a lump-sum investment or a systematic investment plan (SIP) will generate higher returns over the same period. 

While both methods involve the same capital of ₹12 lakh in this scenario, the difference in the final value can be significant due to the way returns are generated over time.

Lumpsum Investment of ₹12 Lakh for 10 Years

In a lump-sum investment, the entire amount is invested at once, allowing the full capital to benefit from compounding over the entire investment period.

For an investment of ₹12 lakh over 10 years at an expected annual return of 12%, the total value at the end of the term would be:

• Total Investment Value: ₹37,27,018
• Invested Amount: ₹12,00,000
• Estimated Returns: ₹25,27,018

This significant growth is due to the compounding effect acting on the entire invested amount from the start of the period. You can check the calculation using the lump sum calculator. 

SIP of ₹10,000 Per Month for 10 Years

In a systematic investment plan, the capital is invested in equal monthly instalments, which means not all of the money enjoys the benefit of compounding for the entire duration.

For a ₹10,000 monthly SIP over 10 years at an expected annual return of 12%, the total value at the end of the term would be:

• Total Investment Value: ₹23,23,391
• Invested Amount: ₹12,00,000
• Estimated Returns: ₹11,23,391

Calculations are done using a SIP calculator. 

Although SIPs reduce the impact of market volatility and allow disciplined investing, the staggered nature of contributions limits the total returns compared to a lump-sum investment for the same capital. 

Read More: Retirement Planning One-Time Investment: How To Turn ₹11 Lakh to a ₹3.3 Crore Retirement Corpus! 

Conclusion

When comparing both methods for the same capital and period, the lump-sum investment results in a higher final value by approximately ₹14,03,627. This is primarily due to the power of compounding over the entire 10 years on the full amount from the beginning. However, the returns are a function of market performance and subject to market risk. 

While each method has its own advantages in different scenarios, from a pure numbers perspective in this example, the lump-sum approach generates a significantly larger corpus.

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.