SIP of ₹10,000 or lump sum investment of ₹5 lakh, where can you quickly get a fund of ₹1 crore?
If you want to build a corpus of ₹1 crore quickly, it is important to understand that SIPs slowly but steadily achieve your goal, whereas lump sum investments offer both higher risk initially and potentially higher returns.
SIP vs. Lump Sum: Many Indians dream of becoming a millionaire quickly. Mutual funds are an excellent investment option to achieve this goal. There are two best ways to invest in mutual funds in India: Systematic Investment Plans (SIPs) and lump sum investments.
SIPs involve investing a fixed amount every month, which benefits from rupee-cost averaging over the long term and provides investment flexibility.
Lump sum investments, on the other hand, involve a large lump sum investment, which immediately exposes you to the risk of market fluctuations. However, if the market rises, the initial investment can yield quick returns.
If you want to build a corpus of ₹1 crore quickly, it is important to understand that SIPs slowly but steadily achieve your goal, whereas lump sum investments offer both higher risk initially and potentially higher returns.
Lump Sum Investment in Mutual Funds:
- Total investment: ₹5 lakh
- Duration: 27 years
- Expected Return (Assumed): 12%
- Estimated return amount: ₹1.02 crore
- Matured Corpus: ₹1.07 crore
- Investing in Mutual Fund SIP:
- Monthly Investment: ₹10,000
- Duration: 21 years
- Total investment amount: ₹25.2 lakh
- Expected Return (Assumed): 12%
- Matured Corpus: ₹1.04 crore
You can see that a SIP can help you reach your goals faster than a lump sum investment. Note that the total investment amount in a SIP is much higher than a lump sum investment.
A lump sum investment involves investing ₹5 lakh at one go, exposing your entire capital to immediate market fluctuations, but allowing you to capitalize on long-term market growth right from the start.
Generally, if the market is trending upwards, a lump sum investment is likely to generate higher returns initially, as your entire corpus is growing from the start.