SIP or lumpsum? How each grows, with examples
A SIP (systematic investment plan) invests a fixed amount every month. A lumpsum invests the whole amount at once. Neither is always better: it depends on when you have the money and how prices move.
The formulas
SIP value = P × ((1 + i)^n − 1) ÷ i × (1 + i), with i = yearly return ÷ 12, n = months
Lumpsum value = amount × (1 + yearly return)^years
Example at an assumed 12% a year for 10 years
| Invested | Value after 10 years | |
|---|---|---|
| SIP of ₹10,000 a month | ₹12,00,000 | about ₹23,23,000 |
| Lumpsum of ₹12,00,000 on day one | ₹12,00,000 | about ₹37,27,000 |
The lumpsum grows more here only because all the money was invested from the first day. Most people earn monthly, so a SIP is how they can invest at all. A SIP also spreads purchases over good and bad months.
Things to remember
- Returns are never guaranteed; equity funds can fall 30-50% in a bad year.
- A step-up SIP (raise the SIP 10% each year) makes a large difference over 15-20 years.
- Add inflation when you plan a goal: ₹25 lakh today is about ₹60 lakh in 15 years at 6% inflation.
Try: SIP · Step-up SIP · Lumpsum · Goal planner