SIP vs Lumpsum Calculator

Monthly SIP Amount

Expected return rate (p.a)

Time period

SIP Returns

Invested Amount

Est. Returns

Total Value

Lumpsum Returns

Invested Amount

Est. Returns

Total Value

A Surprising Story: Two Friends, Two Paths

Two friends, Akash and Binay, decided to start investing. Akash started a SIP of 10,000 per month. Binay, wanting to make a bigger impact, decided to save for a year and invest a lumpsum amount of 1,20,000 at the end of the year.

Over the next decade, Akash's small, disciplined investments benefited from rupee cost averaging—he bought more units when the market was down and fewer when it was up. Binay made his lumpsum investment, but the market was at a high point when he did. After 10 years, they compared their portfolios. To Binay's surprise, Akash's total corpus was significantly larger. Even though they had invested the same total amount, Akash's strategy of consistency and averaging had beaten Binay's attempt to time the market. This calculator demonstrates that for most investors, the discipline of a SIP is often a more reliable path to wealth creation than waiting for the 'perfect' moment to invest a lumpsum.

FAQs

Which is better: SIP or Lumpsum?

There's no single answer. SIP is ideal for salaried individuals, as it promotes disciplined investing and benefits from rupee cost averaging, reducing risk. Lumpsum is suitable for those who have a large sum of money and believe the market is undervalued, but it carries higher risk if the market timing is wrong.

What is Rupee Cost Averaging?

This is a key benefit of SIPs. By investing a fixed amount regularly, you automatically buy more units when the price is low and fewer units when the price is high. This averages out your cost per unit over time, reducing the impact of market volatility.

Why does Lumpsum sometimes show higher returns in the calculator?

The calculator assumes a constant rate of return. In this ideal scenario, money invested earlier (like in a lumpsum) has more time to compound, leading to a larger corpus. However, real-world markets are volatile, which is where the risk-mitigating benefit of SIP's rupee cost averaging comes into play.