Combining Rs 1 lakh one-time investment with Rs 1,000 monthly SIP for 30 years? What 10%, 12%, 15% annualised returns may mean for you

Mutual Fund SIP and Lump Sum Investment Strategy: Many investors prefer setting up a systematic investment plan (SIP) to park their savings in mutual funds gradually. This strategy is particularly helpful in cases where the investor does not want to block or doesn’t have a significant pile of their surplus cash at once. However, combining a lump sum investment—or a one-time investment—with an SIP in a carefully selected mutual fund can increase their chances of building wealth thanks to compounding, which is nothing but periodic returns getting added up to initial principal and leading to accelerated overall investment growth.

In this article, let’s take annualised return rates of 10 per cent, 12 per cent and 15 per cent, and see what they can actually mean for an investor making a lump sum deposit of Rs 1 lakh in a fund and setting up a Rs 1,000 monthly SIP in the same fund for 30 years. 

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Now, let’s get back to our examples.

10% Annualised Return for 30 Years: What a Rs 1 lakh one-time investment followed by a Rs 1,000 monthly SIP may mean for investors

At an annualised 10 per cent return, a Rs 1 lakh initial investment and a Rs 1,000 monthly SIP will lead to a corpus of approximately Rs 40.2 lakh in 30 years (given the total investment of Rs 4.6 lakh), show calculations.

12% Annualised Return for 30 Years: What a Rs 1 lakh one-time investment followed by a Rs 1,000 monthly SIP may mean for investors

Now, with the same invested amount of Rs 4.6 lakh, a 12 per cent annualised return will lead to a corpus of approximately Rs 65.3 lakh, show calculations.

15% Annualised Return for 30 Years: What a Rs 1 lakh one-time investment followed by a Rs 1,000 monthly SIP may mean for investors

The same investment will lead to a total corpus of approximately Rs 1.36 crore at an annualised return of 15 per cent, show calculations.

What if you take the Rs 1 lakh initial investment out of the picture (spreading out that money in SIP)?

Let’s see what happens if the investor instead chooses to set up a monthly SIP of Rs 1,278 without any initial investment.

Spreading the same Rs 4.6 lakh of total investment over a period of 30 years leads to a monthly SIP of approximately Rs 1,278.

A total investment of Rs 4,60,080 through monthly instalments of Rs 1,278 will lead to a corpus of approximately Rs 29,1 lakh, Rs 45.1 lakh and Rs 89.6 lakh at 10 per cent, 12 per cent and 15 per cent respectively, show calculations.

However, it is worth noting that these examples take the same annualised return for lump sum and SIP investments. Practically, annualised returns vary in lump sum and SIP modes of investing for a number of reasons. Investors must also consider that although lump sum investments may perform better in a rising market, SIPs outperform lump sum investments in times of market downturn or volatility.