How does a lumpsum investment grow?
A lumpsum is a single, one-time investment. It earns returns on the full amount from day one, and each year’s gains also earn returns. That is compounding, and it works harder the longer you stay invested.
Maturity = P × (1 + r)n
P is the amount invested, r is the yearly return as a decimal and n is the number of years. Value in today’s money = maturity ÷ (1 + inflation)n.
Worked example
Lumpsum or SIP?
- Lumpsum suits a bonus, maturity amount or inheritance, especially in debt or hybrid funds.
- SIP spreads your entry over time and suits regular income, especially in equity.
- You can mix both: invest part now and spread the rest over several months.
Frequently asked questions
Is lumpsum riskier than SIP?
In volatile markets a lumpsum can be more exposed to the entry price. A SIP averages your cost over time. Over long periods the difference narrows.
Why show the value in today’s money?
Because prices rise. A ₹10 lakh corpus after 20 years buys much less than ₹10 lakh does today. The inflation-adjusted figure shows what it is really worth.
What return should I assume?
Be conservative. Equity may give 10% to 12% over very long periods, but not every year. Debt funds and FDs give lower and steadier returns.
Does this include tax?
No. Tax on gains depends on the type of investment and how long you hold it.