How To Make Your First 1 Crore In 5 Years Lump Sum Vs SIP

Comparison of monthly SIP vs Lumpsum

Comparison of monthly SIP vs Lumpsum

Want to make your first ₹1 Crore in 5 Years? Investing strategies have formulated high returns in less time with the growing market & multiple investment options. What if I tell you it is possible with the right investment strategies! When it comes to growing your money, there are many ways that you can invest. Two of the most important methods that offer high returns on investment are lump sum mutual fund and Systematic Investment Plan (SIP).

While both lump sum and SIP investment gives you an opportunity to grow your wealth, they work differently  while benefiting and considering an investment option.

Let’s take a closer look below.

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Lump Sum Investment vs Systematic Investment Plan (SIP): Which is Better?

To make your first ₹1 Crore, you will need to understand how an SIP and lump sum works. Understanding the advantages and disadvantages as well as the risks involved will help you decide on which investment strategy to choose.

What is Lump sum?

A lump sum investment is a strategy where a large amount of money is invested at once. This is a good investment strategy if you already have a substantial amount  available, as it holds the advantage of immediate market exposure and the potential of higher returns. The earlier you start investing, the better, as it has a longer time to grow with compounding interest. But, investing in lump sum also carries higher risks as your whole investment is subject to market fluctuations from the start.  Let’s weigh the risks to perks ratio while reviewing them below,

Advantages of Lump Sum Investment

  • Potential for Higher Returns: By investing the entire sum upfront, you take advantage of any potential market upswings that occur during the investment period. This can lead to higher returns compared to SIPs.
  • Reduced Transaction Costs: With a Lump Sum investment, you only pay the transaction fees once. This can be advantageous, especially for smaller investment amounts.
  • Psychological Advantage: Investing a large sum upfront can provide a sense of accomplishment and motivate you to achieve your financial goals.

Disadvantages of Lump Sum Investment

  • Market Timing Risk: The biggest challenge with Lump Sum investment is accurately predicting market trends and investing at the right time. If the market dips right after your investment, your returns could be significantly impacted.
  • Large Capital Requirement: This investment method requires having a significant amount of money readily available. Not everyone has access to such a large sum. Making it less accessible to everyone.
  • Psychological Pressure: The thought of investing a large sum can be daunting. This can lead to hesitation and missed opportunities or investing at the wrong time.

Also Read: How to Make 1 Lakh to 1 Crore | Investment Strategies & Insights

How To Earn 1 Crore in 5 years With a Lump Sum?

There are several factors that play an important role to help you achieve your first ₹1 Crore in 5 years when investing with a lump sum. These factors include your investment amount, rate of interest that you expect to earn in a year and taking advantage of compounding. The table below will give you an idea on how much to invest for the expected rate of returns to earn ₹1 Crore in 5 years while taking into account the possible inflation rates:

Expected Annual Return (%) Assumed Inflation Rate (%) Required Lump Sum Investment (Approx.) Future Value After 5 Years (Approx.)
10% 2% ₹62,104 ₹1,31,57,746
10% 5% ₹68,824 ₹1,21,94,583
10% 7% ₹76,433 ₹1,13,47,142
12% 2% ₹53,846 ₹1,40,22,326
12% 5% ₹59,704 ₹1,29,24,814
12% 7% ₹66,438 ₹1,19,43,924
14% 2% ₹47,123 ₹1,49,44,532
14% 5% ₹53,000 ₹1,38,47,191
14% 7% ₹59,726 ₹1,28,65,502
15% 2% ₹44,815 ₹1,54,32,100
15% 5% ₹50,692 ₹1,43,34,657
15% 7% ₹57,426 ₹1,33,53,866
16% 2% ₹42,784 ₹1,59,87,398
16% 5% ₹48,661 ₹1,48,89,949
16% 7% ₹55,394 ₹1,39,09,163

Please Note: This table is only an assumption of a one-time lump sum investment at the beginning of the 5-year period to achieve ₹1 crore. Actual investment returns may differ.

The table shows how the expected annual return and inflation rate affects the necessary lump sum investment. Higher expected returns mean you need less upfront investment to meet your target after inflation. The “future value” column shows the projected total worth of your investment after 5 years, taking in both growth and inflation.

What is SIP?

Systematic Investment Plan or SIP involves investing a fixed amount at regular intervals, usually monthly in a mutual fund or investment thread. This approach is similar to the famous saying “slow and steady wins the race.” as SIPs take into consideration the concept of rupee-cost averaging, where you buy more units when the price is low and fewer units when the price is high. This would require regular investing intervals as it delivers a less stressful and lower risk option when compared to Lump Sum investment strategy. Let’s consider the advantages and disadvantages that the SIP has to offer its investors.

Advantages of investing in SIP

  • Suitable for All Investors: SIPs are accessible to a wider range of investors, regardless of their initial capital. This is because with SIPs you can start small and gradually increase your investment over time.
  • Disciplined Approach: SIPs encourage financial discipline as you need to invest every month to earn higher returns. This habit ensures consistent growth in your corpus over time.
  • Reduces Market Volatility Impact: “Rupee-cost averaging” in SIP helps tackle the risk associated with market fluctuations. By investing in smaller amounts regularly, you can buy units at different prices. This will potentially average out the cost of each unit over time.
  • Psychological Comfort: Investing small amounts regularly can be less intimidating compared to a large Lump Sum investment.

Disadvantages Of An SIP investment

  • Lower Potential Returns: Since you’re not investing a large amount upfront, SIPs might generate slightly lower returns compared to a Lump Sum investment.
  • Time Factor: Reaching your financial goals may take longer with SIPs as your money will start compounding slowly.

Also Read: FD vs Mahila Samman Savings Certificate Which One Is The Best Option?

How To Earn ₹1 Crore With SIP Within 5 Years?

To earn ₹1 Crore in 5 years with SIP, several factors need to be considered including the monthly investment amount, expected rate of returns and inflation rate. The table below will provide a comprehensive breakdown of the estimated monthly SIP amount and interest rate required to gain ₹1 crore in 5 years:

Expected Annual Return (%) Assumed Inflation Rate (%) Required Monthly SIP (Approx.) Total Invested (Approx.) Target Corpus (After Inflation)
15% 2% ₹28,943 ₹1,73,658 ₹1,00,00,000
15% 5% ₹32,800 ₹1,96,800 ₹1,00,00,000 (approx.)
15% 7% ₹36,973 ₹2,21,838 ₹1,00,00,000 (approx.)

Please Note: This table is only an assumption of a one-time lump sum investment at the beginning of the 5-year period to achieve ₹1 crore. Actual investment returns may differ.

The table above shows the following:

  • Expected Return (%): The table shows the assumed annual investment return fixed at 15%.
  • Inflation Rate (%): The second column shows the expected annual inflation rate which affects the value of money over time.
  • Required Monthly SIP: This column shows the estimated monthly investment needed to gain ₹1 crore in 5 years.
  • Total Invested: This column shows the total amount invested through monthly SIP over 5 years.
  • Target Corpus (After Inflation): Here the estimated investment value after 5 years, considering returns and inflation is displayed.

Also Read: Crorepati Strategy To Turn 5,000 into 1Crore With SIP

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Tips on How To Make Your First ₹1 Crore With SIP vs Lump Sum

After understanding the difference between SIP and Lump Sum investment and how much is required to earn ₹1 Crore returns in 5 years, here are some tips on how you can make that happen:

  • Start Early: The power of compounding works best over time. Start investing as early as possible to maximise the growth potential of your investments.
  • Invest Regularly: If you are opting for SIP, commit to investing regularly. Consistent investments, regardless of market fluctuations, can help you benefit from rupee cost averaging.
  • Diversify Your Portfolio: Spread your investments across different asset classes, such as equities, debt, and mutual funds, to optimise returns and tackle risks.
  • Monitor and Review: Stay informed about market trends and regularly review your investment portfolio to make sure it aligns with your financial goals.
  • Seek Professional Advice: Consider consulting a financial advisor to develop a personalised investment plan.
  • Stay Disciplined: Be disciplined and stick to your investment plan to avoid making impulsive decisions based on short-term market fluctuations. Patience and discipline are key to achieving long-term financial success.

Also Read: NSC Scheme to Grow 10000, 25000, 50000 Investment to 14490, 36226 & 72452

In Conclusion

The decision between Lump Sum and SIP depends on your individual circumstances, risk tolerance, initial investment amount available and preferences. Lump sum investment involves putting a significant amount of money upfront, potentially getting higher returns if the market performs well. However, it also carries higher risk due to market volatility and the possibility of mis-timing the market. On the other hand, SIP allows for regular investments over time, spreading out the risk and potentially benefiting from rupee cost averaging.

It best suits investors who plan to start investing with lower sum and gradually increase over time in a disciplined line. . Ultimately, choosing between SIP and Lump Sum investing to achieve ₹1 Crore in 5 years will depend on the individual circumstances, risk tolerance, and investment goals.

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Frequently Asked Questions

Q. Is lump sum investment better than SIP?
Lump sum offers potential higher returns, while SIP offers rupee cost averaging. So, whether Lump Sum is better than SIP will depend on individual circumstances, risk tolerance, and market conditions.

Q. What is the 8 4 3 rule in SIP?
The 8-4-3 rule in SIP suggests investing 8 times your monthly salary, continuing for 4 years, to accumulate wealth in 3 decades.

Q. What happens if I invest 20,000 a month in SIP for 5 years?
Investing ₹20,000 monthly in SIP for 5 years can potentially accumulate significant wealth, depending on the market fluctuations and the fund’s performance.

Q. What if I invest 3000 a month in SIP for 5 years?
Consistent investment of ₹3000 in SIP for 5 years can potentially earn you a return of approximately ₹2,96,255.

Q. What are disadvantages of lump sum investing?
Disadvantages of lump sum investing include potential market timing risks, lack of cost averaging, and susceptibility to market volatility.

Q. Which SIP gives 30% return?
No SIP guarantees 30% return. Focus on consistent performers with a diversified portfolio for long-term growth.



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