SIP + Lumpsum Investment Calculator
Investment Results
Total Invested: $76307.58
Total Returns: $22597.23
Final Amount: $98904.81
CAGR: 5.3%
Understanding Investment Parameters
| Parameter | Description |
|---|---|
| Monthly SIP Amount | The fixed amount you invest each month through Systematic Investment Plan (SIP). |
| Yearly SIP Increase | Percentage by which your monthly SIP contribution increases each year. This helps adjust for inflation and rising income. |
| Initial Lumpsum | One-time investment amount made at the beginning of your investment journey. |
| Yearly Additional Lumpsum | Extra one-time investments made annually, such as from bonuses or tax refunds. |
| Investment Period | The total duration for which you plan to invest, measured in years. |
| Expected Annual Return | The projected annual rate of return on your investments, based on historical performance or future expectations. |
What is SIP?
A Systematic Investment Plan (SIP) allows you to invest a fixed amount at regular intervals, typically monthly. This investment approach offers the benefits of rupee-cost averaging and the power of compounding. By investing regularly regardless of market conditions, you can smooth out market volatility and potentially achieve better returns over time.
What is Lumpsum Investment?
A lumpsum investment is a one-time investment of a larger amount. This approach can be beneficial when you have a substantial sum available (like a bonus or inheritance) or when market valuations are attractive. Combining lumpsum with SIP investments can create a balanced investment strategy, leveraging both immediate market entry and the benefits of dollar-cost averaging.
The Power of Compounding
Compounding is the process where the returns generated by your investment also earn returns over time. The longer your investment horizon, the more powerful this effect becomes. Starting early, even with smaller amounts, can lead to significant wealth creation due to compound growth.
SIP Step-Up Strategy
The Yearly SIP Increase feature allows you to implement a SIP step-up strategy, where you increase your monthly contribution each year. This approach aligns with your likely income growth over time and helps counter the effects of inflation. A 5-10% annual increase can significantly boost your final corpus without straining your finances.
Tax Considerations
Investment returns may have different tax implications depending on:
- Holding period (short-term vs long-term)
- Investment vehicle type (equity, debt, hybrid)
- Local tax regulations
Strategic Allocation
Optimal use of SIP vs Lumpsum:
SIP Recommended When:
- Regular income stream
- Market volatility concerns
- Long-term wealth building
Lumpsum Recommended When:
- Large capital availability
- Market undervaluation periods
- Short-to-medium term goals
Market Timing Risk
Lumpsum investments carry higher market timing risk. Historical data shows:
- Entry point significantly impacts returns
- SIP reduces timing risk by 40-60%
- Combined strategies balance risk/reward
Inflation Protection
The SIP step-up feature directly combats inflation:
- 5% annual increase matches average inflation
- Maintains purchasing power
- Compounding effect on raised investments
Historical Perspective
Based on analysis of 30-year market data:
| SIP Only (15% CAGR) | ₹1.2Cr final amount |
| SIP + Lumpsum | ₹1.8Cr final amount |
| With 5% SIP Step-Up | ₹2.4Cr final amount |
*Example based on ₹10k monthly SIP + ₹1L annual lumpsum over 20 years