How the Lumpsum vs SIP Calculator Works
You enter one total amount. In the lumpsum approach, the whole amount is invested on day one. In the SIP approach, the same amount is invested in equal monthly instalments over the number of months you choose.
Money that has not yet been invested does not sit idle in the model: it earns the return you set for savings accounts or liquid funds, while each instalment, once invested, earns your expected market return.
Both approaches are measured when the last instalment has been invested, so the invested amount is identical and the comparison is like-for-like. The growth table shows how the gap between the two builds up over time.
Why Compare Lumpsum and SIP Before Investing?
- See the real cost of waiting: spreading an investment over months usually means part of your money earns less for a while, and this calculator puts a rupee figure on that.
- Make better use of windfalls: bonuses, maturity proceeds, inheritance or property sale money often arrive as a lump sum, and the choice of how to deploy it is a common dilemma.
- Test your own assumptions: change the instalment period or the interest on uninvested money and see when staggering the investment stops costing you anything.
- Understand risk versus return: the calculator uses a constant return, so the gap it shows is the baseline you are paying for the comfort of entering the market gradually.
Formula Used
Both strategies use compound growth at the monthly rate equivalent to the annual rate. The lumpsum and SIP values are:
Lumpsum FV = P × (1 + i)^m | SIP FV = Σ [ (P / m) × (1 + i)^(m − t + 1) ] + interest earned on cash still waiting- PTotal amount available to invest
- mNumber of monthly instalments, which is also the comparison period in months
- iMonthly return rate equivalent to the annual return, i.e. (1 + annual return)^(1/12) − 1
- tMonth in which an instalment is invested (1 to m)
Example Calculation
Suppose you have a lump sum to invest at an expected 12% annual return, and the SIP route spreads it over 12 months while money waiting to be invested earns 6% a year.
- Total Amount1,000,000
- Expected Return12% p.a.
- Instalment Period12 months (≈ 83,333 a month)
- Interest on Uninvested Money6% p.a.
- After 12 months: Lumpsum ≈ 1,120,000 vs SIP ≈ 1,091,792. Lumpsum is ahead by ≈ 28,208 (about 2.6%).
Important Assumptions
- The expected return is assumed to be constant every year. Real markets move up and down, so actual results will differ, and in a falling or volatile market the SIP route can come out ahead.
- Both options are compared at the end of the instalment period, when the last instalment has been invested. Longer holding periods are not modelled.
- Both strategies earn the same return once invested, and the invested amount is the same in both, so any gap comes purely from timing.
- Monthly instalments are invested at the start of each month, and the savings or liquid-fund return on waiting cash is assumed to be constant.
- Annual rates are converted to equivalent monthly rates, so the lumpsum figure matches our Lumpsum Calculator. A regular SIP calculator that divides the annual rate by 12 will show slightly different numbers.
- Taxes, exit loads, expense ratios and transaction charges are not included. Past returns do not guarantee future returns.