Rs 10,000 Monthly SIP Or Rs 10 Lakh Lumpsum: Which One Is Better For You?
You must evaluate your financial goals, current situation and risk appetite to decide which option is best for you.
Mutual funds have become one of the most popular investment options for long-term wealth accumulation in recent years due to the market-linked returns and flexibility they offer. Mutual funds usually give higher returns compared to traditional investment instruments. Investors across categories can also choose systematic investment plans (SIPs) or lumpsum investments as per their financial goals.
When it comes to building wealth through mutual funds, investors often face a common dilemma: should you invest a lump sum of Rs 10 lakh, or opt for a Systematic Investment Plan (SIP) with a modest Rs 10,000 per month?
Both approaches could be rewarding and the choice depends on your financial goals, risk appetite and investment horizon.
Investing Rs 10 lakh as a lump sum means your entire investment is subject to market conditions at the time of investment. If you invest when the market is at its peak and prices drop soon after, your portfolio could face an immediate loss. On the other hand, if you invest during a slowdown in the stock market, you may benefit from subsequent price appreciation.
SIPs minimise risk due to the rupee cost averaging, where you buy more units when prices are low and fewer units in an upward market, averaging out the cost per unit. With a Rs 10,000 monthly SIP, you spread your investment over time, reducing the risk of entering the market at the wrong time.
Here’s a breakdown of how much returns both options can generate over 10 years.
Rs 10,000 Monthly SIP Vs Rs 10 Lakh Lumpsum
Investing In Mutual Fund SIPs
Monthly investment: Rs 10,000
Tenure: 10 years
Total investment: Rs 12 lakh
Expected returns: 12%
Estimated returns: Rs 11.23 lakh
Maturity corpus: Rs 23.23 lakh
Investing In Mutual Fund Lumpsum
Total investment: Rs 10 lakh
Tenure: 10 years
Expected returns: 12%
Estimated returns: Rs 20.75 lakh
Maturity corpus: Rs 30.75 lakh
As per the above calculation, a lumpsum of Rs 10 lakh may give higher returns over a period of 10 years, compared to a monthly SIP of Rs 10,000. However, SIPs could be more suitable for investors who want to build wealth with small investments every month, especially salaried individuals.
On the other hand, if you have a large corpus and confidence in the market’s long-term potential, a lump sum investment could maximise your returns. Choosing the right investment option should be based on your investment goals and risk appetite.
