SIP and Lump Sum Investment Return Calculator

Most portfolios are built two ways at once: a lump sum invested today, and a systematic investment plan (SIP) adding a fixed amount every month. This calculator projects both together — compounding each at the same monthly rate — and reports what you invested, what each stream grew to, your total earnings, and what the final balance is worth after inflation.

How It Works

The calculator splits the projection into two standard future-value calculations and adds them:

1. Lump sum. The initial amount compounds monthly at one-twelfth of the annual return for the full term.
2. SIP. Each monthly contribution is treated as an ordinary annuity — deposits at month-end — and accumulated with the annuity future-value formula. At a 0% return, the SIP value is simply the contributions summed.
3. Totals. Invested is the lump sum plus all monthly contributions; earnings are the final value minus invested; and the wealth gain ratio divides final value by invested. A year-by-year breakdown simulates the balance month by month so you can see the growth path.
4. Inflation adjustment. If you enter an inflation rate, the final value is divided by $(1 + \text{inflation})^{\text{years}}$ to express it in today's purchasing power.

The Formulas

$\text{FV}_{\text{Lump}} = P \left(1 + \frac{R}{12}\right)^{n}, \qquad \text{FV}_{\text{SIP}} = PMT \times \frac{\left(1 + \frac{R}{12}\right)^{n} - 1}{\frac{R}{12}}$

where $P$ is the lump sum, $PMT$ the monthly SIP, $R$ the annual return as a decimal, and $n$ the total months.

$\text{Wealth Gain Ratio} = \frac{\text{Total Value}}{\text{Total Invested}}, \qquad \text{Real Value} = \frac{\text{Total Value}}{(1 + i)^{\text{years}}}$

Input Parameters

| Parameter | Unit | Description | |---|---|---| | Lump Sum | Currency | Invested once, today. | | Monthly SIP | Currency | Invested at the end of every month. | | Annual Return | % per year | The assumed constant average return. | | Years | Years | Investment horizon. | | Inflation Rate | % per year | Optional; deflates the final value into today's dollars. |

Worked Example

Invest $10,000 today plus$500 a month for 20 years at an 8% annual return (a monthly rate of 0.6667%, 240 months in total).

• Lump sum value: $10,000 × (1.006667)^240 = **$49,268.03**.
• SIP value: $500 × [(1.006667)^240 − 1] ÷ 0.006667 = **$294,510.21**.
• Total value: $343,778.24**, on **$130,000 invested — earnings of **$213,778.24** and a wealth gain ratio of **2.64**: every dollar invested became$2.64.
• In today's dollars at 3% inflation: $343,778.24 ÷ 1.03^20 = **$190,341.67**.

Notice the asymmetry: the SIP contributes twelve times more cash than the lump sum, yet produces only about six times the final value — the lump sum's head start compounds for the full 20 years, while the average SIP dollar is invested for roughly half that time.

Interpreting the Results

• Wealth gain ratio is the quickest health check. Below 1 means the projection loses money; around 2–3 over two decades at equity-like returns is typical of a disciplined contribution plan.
• Earnings versus invested shows where wealth came from. In the example, growth supplies 62% of the final balance — contributions did the heavy lifting early, compounding late.
• The real (inflation-adjusted) value is the number to plan spending against. A $343,778 balance that buys what$190,342 buys today is still a strong outcome, but it is not a $343,778 lifestyle in today's terms.

Lump Sum vs SIP Timing

Given a pot of cash today, history generally favors investing it immediately rather than dribbling it in: markets rise more often than they fall, so time in the market usually beats timing entries. A SIP's real-world role is different — it converts each paycheck into invested assets automatically and buys more units when prices dip, enforcing discipline rather than optimizing entry price. This calculator assumes both streams earn the same smooth return, so it cannot capture that volatility benefit; use it for scale and trajectory, not for timing strategy.

Limitations

• Smooth returns. A constant monthly return is a modeling convenience. Real sequences — crashes early versus late — produce different outcomes at the same average return.
• No taxes, fees or step-ups. Fund expense ratios, taxes on gains and dividends, and contribution increases over time are not modeled; the SIP amount is fixed for the whole term.
• Inflation is a single rate applied to the final balance only, not a year-by-year price path.

Frequently Asked Questions

What wealth gain ratio should I expect?

It depends on return and horizon: at 8% over 20 years, a pure lump sum multiplies about 4.9 times, while a contribution-heavy plan like the example lands nearer 2.6 times, because later contributions have less time to grow. Longer horizons and higher returns push the ratio up sharply.

Why does the SIP in the breakdown grow slightly differently from the formula value?

The year-by-year table is a month-by-month simulation, which accumulates rounding at each step. Small cent-level differences from the closed-form totals are normal and do not affect the headline figures.

Should I enter a return before or after inflation?

Either — but be consistent. Enter a nominal return (for example 8%) and use the inflation input to see real value, or enter a real return (around 5%) and leave inflation at zero. Doing both double-counts inflation.