SIP or lump sum? What ₹5,000 a month can actually become
A side-by-side look at investing monthly versus all at once, with real numbers, a simple chart and the one question that decides it for you.
The short version
- A SIP invests a fixed amount every month; a lump sum invests everything on day one.
- If markets mostly rise, lump sum usually ends higher because more money is invested for longer.
- If markets fall before they recover, a SIP buys more units cheaply and can come out ahead.
- Most salaried people do not have a lump sum, so a SIP is often the honest default.
Every new investor eventually asks the same thing: should I put my money in a little at a time, or all at once? The internet will give you strong opinions in both directions. The maths is calmer than the opinions, so let us start there.
What the two words mean
A Systematic Investment Plan (SIP) is an instruction to your mutual fund to pull a fixed amount from your bank account on a fixed date every month and buy units at that day's price (the NAV).
A lump sum is a single, one-time investment. You invest the full amount today, at today's NAV.
What ₹5,000 a month can grow to
The table below assumes you invest ₹5,000 at the start of every month and the fund grows at a steady yearly rate. Real markets never move in a straight line, so treat these as illustrations, not promises.
| Years | You invest | At 8% a year | At 10% a year | At 12% a year |
|---|---|---|---|---|
| 5 | ₹3,00,000 | ₹3,67,070 | ₹3,85,859 | ₹4,05,518 |
| 10 | ₹6,00,000 | ₹9,06,416 | ₹10,07,288 | ₹11,20,179 |
| 15 | ₹9,00,000 | ₹16,98,892 | ₹20,08,106 | ₹23,79,657 |
| 20 | ₹12,00,000 | ₹28,63,300 | ₹36,19,934 | ₹45,99,287 |
Notice how the gap between "you invest" and the final value widens with time. In year 5 the growth is a small bonus. By year 20 it is most of the money. That is compounding, and its main ingredient is patience.
- You invest
- Value at 10%
Assumes a steady 10% yearly return with monthly investing. Real returns vary year to year and can be negative.
Show the numbers
| You invest | Value at 10% | |
|---|---|---|
| 5 yrs | ₹3,00,000 | ₹3,85,859 |
| 10 yrs | ₹6,00,000 | ₹10,07,288 |
| 15 yrs | ₹9,00,000 | ₹20,08,106 |
| 20 yrs | ₹12,00,000 | ₹36,19,934 |
When lump sum wins
If you already have ₹6 lakh sitting in a savings account and markets rise steadily, investing it all today usually ends higher. At 12% a year, ₹6 lakh invested once grows to about ₹18.6 lakh in ten years, compared with about ₹11.2 lakh from investing the same ₹6 lakh slowly as a SIP.
The reason is simple: with a lump sum, every rupee starts working on day one. With a SIP, the last instalment has only a month to grow.
When SIP wins
Markets do not rise steadily. Here is a six-month example where the NAV falls and then recovers. One investor puts ₹30,000 in on day one. Another invests ₹5,000 a month.
| Month | NAV | SIP units bought |
|---|---|---|
| 1 | ₹100 | 50.0 |
| 2 | ₹80 | 62.5 |
| 3 | ₹64 | 78.1 |
| 4 | ₹80 | 62.5 |
| 5 | ₹100 | 50.0 |
| 6 | ₹125 | 40.0 |
| Total | 343.1 |
The lump sum investor bought 300 units at ₹100. At the final NAV of ₹125 that is worth ₹37,500. The SIP investor bought 343.1 units at an average cost of about ₹87, worth ₹42,891. Buying more units when prices were low made the difference. This is called rupee cost averaging.
The question that decides it
Forget which method is "better" in theory. Ask yourself: where is my money coming from?
- From a monthly salary? Start a SIP. You cannot lump-sum money you have not earned yet.
- From a bonus, gift or matured FD? You can invest it at once, or spread it over 6 to 12 months if a sudden fall would make you panic and sell.
- Needed within three years? Neither. Short-term money belongs in safer, more stable options, not equity funds.
A simple way to begin
Pick one diversified fund, set up a SIP you can afford even in a bad month, and choose a date just after your salary arrives. Then leave it alone for years, not weeks. If our beginner's guide to investing is your next step, start there.
This article is for education only and is not personalised investment advice. Returns shown are illustrations, not forecasts. Rules and rates change, so check the latest information and consider a SEBI-registered adviser for decisions about your own money.
We explain Indian personal finance in plain language, show our assumptions and never take money to recommend a product. Read our editorial policy.