Rs 5,000 SIP Vs Rs 5 Lakh Lump Sum: What Builds A Bigger Corpus In 35 Years

When it comes to building long-term wealth through mutual funds, investors often find themselves choosing between two popular strategies—Systematic Investment Plan (SIP) and Lump Sum investment. Both approaches aim to grow your money over time, but the way they function and the corpus they generate can vary significantly. If you're planning for long-term goals such as retirement or financial independence, understanding how these methods perform over a 35-year horizon can help you make more informed choices.

Understanding The Basics: SIP And Lump Sum Compared

A Systematic Investment Plan (SIP) allows individuals to invest a fixed amount regularly—whether monthly, quarterly, or annually—into a mutual fund scheme. This consistent approach benefits from rupee cost averaging, which can reduce the impact of market volatility over time.

On the other hand, a Lump Sum investment refers to deploying a substantial amount of money at once. This method gives your money the advantage of compounding from day one, provided the timing of the market entry is favourable.

SIP Performance Over 35 Years

Assuming an investor commits to a monthly SIP of ₹5,000 in a mutual fund that delivers an annualised return of 12%, the long-term outcomes can be impressive. Here's a look at what the corpus could look like at various intervals:

• In 10 Years: Investment = ₹6,00,000, Capital Gains = ₹5,20,179, Total Corpus = ₹11,20,179

In 20 Years: Investment = ₹12,00,000, Capital Gains = ₹33,99,287, Total Corpus = ₹45,99,287

In 30 Years: Investment = ₹18,00,000, Capital Gains = ₹1,36,04,866, Total Corpus = ₹1,54,04,866

In 35 Years: Investment = ₹21,00,000, Capital Gains = ₹2,54,54,156, Total Corpus = ₹2,75,54,156

According to investment experts, SIPs provide strong risk management by spreading out investments over time. This feature can help reduce the risk of entering the market at an unfavourable point, especially in volatile conditions.

Lump Sum Investment Outcomes Over The Same Period

Now, let’s assume an investor instead opts to invest ₹5 lakh in one go and stays invested for the same 35-year period with the same 12% annualised return. The expected corpus at various intervals is as follows:

• In 10 Years: Investment = ₹5,00,000, Capital Gains = ₹10,52,924, Total Corpus = ₹15,52,924
  
  
  
• In 20 Years: Investment = ₹5,00,000, Capital Gains = ₹43,23,147, Total Corpus = ₹48,23,147
  
  
  
• In 30 Years: Investment = ₹5,00,000, Capital Gains = ₹1,44,79,961, Total Corpus = ₹1,49,79,961
  
  
  
• In 35 Years: Investment = ₹5,00,000, Capital Gains = ₹2,58,99,810, Total Corpus = ₹2,63,99,810

According to financial planners, if you have a large amount ready and the market is not overvalued, a lump sum investment can potentially generate a higher return due to more capital being compounded from day one. However, it also comes with the risk of investing at a market peak.

Comparative Insights: SIP Or Lump Sum?

From a 35-year perspective, the corpus generated by SIPs (₹2.75 crore) slightly surpasses that of the lump sum approach (₹2.63 crore) despite the total investment in SIP being higher (₹21 lakh vs ₹5 lakh). The key difference lies in the power of compounding and time in the market. SIPs gradually build capital and benefit from averaging, while lump sum relies heavily on the market’s performance at the time of entry.

Moreover, SIPs are more accessible for young investors or those with limited capital, allowing them to start small and grow steadily. Lump sum, while potentially more rewarding, is suitable for those with substantial idle capital and a higher risk appetite.

What Should You Choose?

The choice between SIP and lump sum depends on multiple factors—your financial goals, market understanding, available capital, and risk tolerance. Experts often recommend SIPs for new investors or for building discipline, while lump sum may be ideal during market corrections or when surplus funds are available.

Both SIP and Lump Sum strategies have their merits and can lead to impressive corpus creation if invested wisely and with patience. The most critical factor remains consistency and a long-term vision. Before deciding on either method, it's essential to assess your financial situation, consult professionals, and align the choice with your investment horizon.

Disclaimer: This article is for informational purposes only. Investors are advised to consult certified financial planners before making investment decisions. The figures mentioned are based on assumed returns and may vary with actual market performance.