To calculate SIP returns, visit the Franklin Templeton Mutual Fund SIP Calculator
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What is lumpsum investment?
A Lumpsum Investment Plan is a mode of investment which allows you to invest an larger amount of money in any mutual fund scheme at one time instead of staggering it over several small investments. It is the counterpart to the other popular mode of investing i.e. through an SIP.
Benefits of lumpsum investments over SIP
- More convenient than a SIP Mode of Investment : For those operating on low bank balances or high quantum of SIPs, the process can often require constant diligence and efforts to ensure the deposits happen as per plans. In a lump sum investment, it’s significantly simpler and convenient since you, as an investor, can reap the constantly accruing benefits without having to worry all the time about the investment.
- Better control over the investment instruments by the investors: Many argue that an investment via a lump sum amount offers more control, or at least, a higher degree of perceived control, to the investor, as compared to the SIP mode. Investors can make a free choice on not only the amount of the investment but also on the schemes and the time period for which they want to invest. On the other hand, there are plenty of mutual fund schemes that tend to have lower or upper limits on the allowable SIP amounts. Worse, with nearly all mutual fund schemes now charging exit load fees for redemption within a year, a SIP is more likely to cause a pain point when it’s time to withdraw.
- Better returns during the bearish times : In the case of long term investments, their timing can be especially pivotal. If a lump sum investment is made at the time of economic slump, especially when there is certain recovery potential in the short term, the returns can be much higher than they would be in case investment is made via a SIP. This is because the entire amount will be taken into account during the bull period of the market, as opposed to only a fraction of the amount of investment in the case of SIPs.
- Lump sum investing takes better advantage of the power of compounding : SIP investments work on the concept of rupee cost averaging and the power of compounding. On a closer look however, we see that a lump sum investment leverages the power of compounding in a superior way. When the principal amount is higher, all other factors being equal, the result of the generated return will be higher. In the case of SIP, since the principal amount can be as low as Rs. 500 per month, the consequent interest on the investment is therefore significantly less. As opposed to this, when a sizeable amount is invested as a lump sum and for a longer period of time, the return on this investment is much higher.
- More helpful in cases where future income is uncertain: In specific cases wherein the investment is not for the means of making regular redemption and is rather to accumulate wealth; a lump sum mode of investment proves to be much more effective. If you were to find yourself on the receiving end of windfall gains thanks to a market rally, you’d probably thank yourself for having made that lump sum investment method.
How does the lumpsum calculator work?
A lumpsum calculator is an automated tool that does all your investment math for you.
This lumpsum Calculator helps you compute how much returns you would have made if you would have invested an amount of money on a particular day in the past.
Instead of painstakingly doing all the calculations manually, all that you have to do with a SIP calculator is enter the amount you would have been able to invest back then, the period for which you would have wanted to invest, and it instantaneously gives you the returns you would have made during that period.
Not only does it instantaneously tell you the gains you’d have generated, but it also allows you to modify any of the variables to effortless see how they impact your overall returns. As a result, you’re able to quickly compare returns between SIPs and other investment options as well - such as an FD.