The same total amount invested all at once against the same amount spread monthly, at the same assumed rate.
| Year | Invested so far (SIP) | SIP value |
|---|---|---|
| 1 | ₹1,20,000 | ₹1,28,093 |
| 2 | ₹2,40,000 | ₹2,72,432 |
| 3 | ₹3,60,000 | ₹4,35,076 |
| 4 | ₹4,80,000 | ₹6,18,348 |
| 5 | ₹6,00,000 | ₹8,24,864 |
| 6 | ₹7,20,000 | ₹10,57,570 |
| 7 | ₹8,40,000 | ₹13,19,790 |
| 8 | ₹9,60,000 | ₹16,15,266 |
| 9 | ₹10,80,000 | ₹19,48,215 |
| 10 | ₹12,00,000 | ₹23,23,391 |
At a steady positive rate, money invested earlier compounds for longer. The whole lump sum is working from day one, while a SIP's last instalment has been invested for one month. With a constant rate the lump sum wins almost every time, and by a wide margin over long periods.
The comparison assumes a rate that never varies. In a market that falls after you invest, the lump sum takes the fall on the entire amount while the SIP keeps buying at lower prices. The SIP is not a better investment so much as a different bet: it trades some expected return for a much narrower range of outcomes, and for money you would otherwise not have invested at all, it is the one that actually happens.
Most people do not have the choice. A SIP is what regular income allows; a lump sum is what a bonus or a sale produces. The useful question is usually not which is better but what to do with the money you actually have.
Every figure above rests on a rate you chose. These pages use the prices that really occurred.
Not investment advice — read the disclaimer.