Question 1

What is a lumpsum investment?

Accepted Answer

A lumpsum investment is a one-time investment of a fixed amount, as opposed to SIP where you invest regularly. Lumpsum investments benefit from compounding over the entire tenure.

Question 2

How is lumpsum return calculated?

Accepted Answer

Lumpsum future value = P × (1 + r)^n, where P is the principal amount, r is the annual rate of return, and n is the number of years.

Question 3

When is lumpsum better than SIP?

Accepted Answer

Lumpsum investing is typically better when markets are at a low point, as you deploy all capital at an attractive valuation. SIP is better for salaried individuals who receive regular income, as it averages out market volatility through rupee cost averaging.

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