Lumpsum vs SIP
A lumpsum investment puts the entire amount to work on day one, rather than spreading it across monthly instalments like a SIP does. If the market rises steadily from that day, a lumpsum outperforms an equivalent SIP, because every rupee has been compounding for longer. If the market falls first, a lumpsum has no averaging effect to soften the entry price — the whole amount bought in at the top.
In practice, most people use both: a lumpsum for money they already have (a bonus, a maturity payout, an inheritance) and a SIP for money they're still earning.
How this is calculated
Straightforward compound growth, applied once a year:
FV = P × (1 + r)n
where P is the amount invested, r is the expected annual return, and n is the number of years.
Frequently asked questions
Is a lumpsum riskier than a SIP?
It carries more timing risk — the entire amount is exposed to whatever the market does right after you invest, with no averaging. Over long periods (10+ years) the difference tends to shrink, but a lumpsum invested right before a sharp downturn will underperform a SIP started at the same time.
What return rate should I assume?
There's no single right answer — it depends what you're invested in. Equity has historically returned more than debt over long periods but with far more year-to-year swings. Use a rate you'd still be satisfied with if actual returns come in below it, not the best year you've ever seen quoted.
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