SIP vs Lumpsum: 5000 Rupee SIP Or Lumpsum? 2 Crore Vs 7 Crore Profit In 30 Years! Here Is The Real Truth
SIP vs Lumpsum: When stepping into the world of investing, the biggest question that haunts the common individual is regarding the method of investment. Should one save a small amount every month via a Systematic Investment Plan (SIP), or invest a large sum all at once (Lumpsum)? Recently, famous financial influencer Ankur Warikoo calculated the math behind a ₹5000 investment in one of his videos. According to his analysis, there can be a massive difference in returns between these two methods over the long term.
Before investing in mutual funds or the stock market, it is crucial to understand the real difference and the risk factors associated with these two methods. Let us see where your ₹5000 investment can take you over a span of 30 years.
Comparative Analysis of Investment
According to the data provided in the video, a clear distinction is observed between the returns of SIP and Lumpsum over time. The table below illustrates how the power of compounding works, especially in long-term investments.
| Time Period | SIP Value (Approx) | Lumpsum Value (Approx) |
|---|---|---|
| After 1 Year | ₹44,400 | ₹7,800 |
| After 10 Years | Difference becomes apparent | Significant growth |
| After 30 Years | Approx ₹2 Crore 2 Lakhs | Approx ₹7 Crore 4 Lakhs |
Looking at the statistics above might surprise anyone. After 30 years, while the amount accumulated through SIP stands at around ₹2 Crores, the Lumpsum investment reaches the staggering figure of ₹7 Crores. Does this mean one-time investment is the best? Here lies the real mystery.
The Real Risk or ‘The Catch’
While the ₹7 Crore return might make Lumpsum look like the best option, the reality is not always that simple. In his analysis, Ankur Warikoo highlighted the core risk behind this, which is Market Timing.
- Market Uncertainty: In Lumpsum investment, the ‘price’ at which you enter the market is the most critical factor. If you invest when the market is at its peak (High), your returns will not be very impressive.
- Identifying the Right Time: On the other hand, you can only achieve that massive return if you invest when the market is down (Low). However, the difficulty lies in the fact that it is nearly impossible for a common investor to determine whether the market is currently ‘High’ or ‘Low’.
Final Verdict: Which is Right for You?
The conclusion drawn from the analysis emphasizes safety and peace of mind. To avoid the uncertainty and risk of market timing, SIP (Systematic Investment Plan) is described as the safer and wiser choice.
In an SIP, you invest on a fixed date every month, allowing you to benefit from ‘Rupee Cost Averaging’ regardless of whether the market is up or down. Therefore, instead of being lured by the ₹7 Crore figure, the SIP method is considered more acceptable for building guaranteed and risk-adjusted wealth over the long term.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investments in mutual funds or the stock market are subject to market risks. Please consult your financial advisor and read all related documents carefully before investing.
