A Rs 15,000 monthly SIP could build a slightly bigger corpus than a Rs 15 lakh lumpsum over 20 years, based on an assumed 12% annual return.
The result may seem surprising because the entire Rs 15 lakh lumpsum gets invested at the start, giving the full amount two decades to compound.
The key difference is the amount invested. The SIP investor puts in Rs 36 lakh over 20 years, more than twice the Rs 15 lakh invested through the lumpsum strategy.
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SIP Corpus
Consider an investor who puts Rs 15,000 into a mutual fund every month for 20 years. At an assumed annual return of 12%, the total investment would be Rs 36 lakh.
The estimated returns would be around Rs 1.13 crore, taking the maturity corpus to approximately Rs 1.49 crore.
The SIP spreads the investment across 240 monthly instalments. While the earliest instalments remain invested for almost the entire period, later contributions have less time to grow.
That means not every rupee invested through the SIP gets 20 years of compounding.
Lumpsum Corpus
Now consider an investor who puts Rs 15 lakh into a mutual fund at the beginning and holds the investment for 20 years.
At an assumed annual return of 12%, the estimated returns would be around Rs 1.29 crore, taking the maturity corpus to approximately Rs 1.44 crore.
The lumpsum has one clear advantage: the full Rs 15 lakh is invested from day one. The entire amount therefore gets the opportunity to compound for the complete 20-year period.
What Wins?
Despite that advantage, the Rs 15,000 monthly SIP produces the larger corpus in this comparison – about Rs 1.49 crore versus Rs 1.44 crore for the Rs 15 lakh lumpsum.
The reason is straightforward. The SIP investor contributes Rs 36 lakh over 20 years, compared with Rs 15 lakh for the lumpsum investor.
The comparison therefore does not show that SIPs always outperform lumpsum investments. It shows what happens when a higher total amount is invested through monthly contributions.
For investors, the choice between SIP and lumpsum depends on cash flow, risk appetite, financial goals and the amount of capital available upfront.
An SIP can allow investors to invest from regular income without arranging a large amount at the beginning. A lumpsum, meanwhile, allows the entire available capital to enter the market at once.
Ultimately, neither strategy is a universal winner. The outcome depends on how much is invested, when it is invested and how long the money remains invested.
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