How Lumpsum Investment Works
When you invest a lump sum, your money grows through the power of compound interest. The formula for calculating lumpsum returns is:
A = P × (1 + r)^n
Where A = Final Amount, P = Principal, r = Annual Rate, n = Years
Example Calculation
If you invest ₹5 lakhs at 12% annual returns for 10 years:
- Final Value: ₹15,52,924
- Total Returns: ₹10,52,924
- Money Multiplied: 3.1x
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Power of Time
The same ₹5 lakhs at 12% for 20 years grows to ₹48.23 lakhs - almost 10x! Time is your biggest ally in wealth creation.
Lumpsum vs SIP Comparison
| Factor | Lumpsum | SIP |
|---|---|---|
| Timing | Critical | Less important |
| Risk | Higher | Averaged |
| Best for | Bull markets | All markets |
| Discipline | One-time decision | Regular commitment |