SIP vs Lumpsum vs FD: Which Grows Money Faster?
Over 5+ years, an equity lumpsum usually grows fastest, a SIP comes next, and an FD is slowest but guaranteed. At an assumed 12% equity return, ₹12 lakh invested at once grows to about ₹37,27,018 in 10 years, ₹10,000 a month via SIP to ₹23,23,391, and the same ₹12 lakh in a 7% FD to ₹24,01,917.
How SIP, lumpsum and FD work
- SIP (systematic investment plan): you invest a fixed amount, say ₹10,000, in a mutual fund every month. Each instalment buys units at that day’s price (NAV).
- Lumpsum: you invest the whole amount in one go, so all of it is exposed to the market from day one.
- Fixed deposit (FD): you lock money with a bank at a fixed rate for a fixed term. The monthly-saving version is a recurring deposit (RD).
So there are really two fair comparisons: SIP vs RD when you save from monthly income, and lumpsum vs FD when you already have a sum of money. Comparing a SIP with a lumpsum is only fair when you actually have the full amount today.
The formulas
SIP maturity (as used by most calculators): FV = P × [(1 + i)n − 1] ÷ i × (1 + i), where P is the monthly amount, i is the annual return ÷ 12 ÷ 100 and n is the number of months. Lumpsum: FV = P × (1 + r)years. FD with quarterly compounding: FV = P × (1 + r ÷ 4)4 × years.
Worked example: ₹10,000 a month vs ₹12 lakh at once
Assume equity mutual funds return 12% a year on average over the long run and a bank FD or RD pays 7%, compounded quarterly. These are assumptions, not promises: equity returns vary a lot year to year, and FD rates change with RBI policy.
| Period | Total invested | SIP ₹10,000/mo at 12% | RD ₹10,000/mo at 7% | Lumpsum at 12% | FD at 7% |
|---|---|---|---|---|---|
| 5 years | ₹6,00,000 | ₹8,24,864 | ₹7,19,328 | ₹10,57,405 | ₹8,48,867 |
| 10 years | ₹12,00,000 | ₹23,23,391 | ₹17,37,017 | ₹37,27,018 | ₹24,01,917 |
| 15 years | ₹18,00,000 | ₹50,45,760 | ₹31,76,822 | ₹98,52,418 | ₹50,97,269 |
| 20 years | ₹24,00,000 | ₹99,91,479 | ₹52,13,827 | ₹2,31,51,103 | ₹96,15,341 |
Computed in Python. The lumpsum and FD columns invest the same total (for example ₹12 lakh for 10 years) on day one.
Over 10 years, a ₹10,000 SIP grows to ₹23,23,391, against ₹17,37,017 in an RD, a gap of ₹5,86,373. If you had ₹12 lakh upfront, a lumpsum at 12% grows to ₹37,27,018, against ₹24,01,917 in an FD. The lumpsum beats the SIP mainly because all the money is invested for the full 10 years, while SIP money goes in gradually.
Try it: Plug in your own monthly amount and expected return in the SIP Calculator
What if returns are lower?
Equity returns are not fixed. Here is the same 10-year plan at different average returns:
| Average annual return | SIP ₹10,000/mo, 10 years | Lumpsum ₹12 lakh, 10 years |
|---|---|---|
| 8% | ₹18,41,657 | ₹25,90,710 |
| 10% | ₹20,65,520 | ₹31,12,491 |
| 12% | ₹23,23,391 | ₹37,27,018 |
| 14% | ₹26,20,914 | ₹44,48,666 |
Even at 8%, both equity routes beat a 7% FD before tax, but the margin is thin. The longer the horizon, the more likely equity averages out above fixed income. For anything under 3 years, the swings can easily wipe out the extra return.
Why SIPs smooth out market swings
A SIP buys more units when prices are low and fewer when they are high. This is called rupee cost averaging. A simple hypothetical illustration: you invest ₹10,000 a month for 5 months while the NAV moves 100, 80, 60, 80, 100.
- You buy 616.67 units for ₹50,000, an average cost of ₹81.08 per unit, below the simple average NAV of ₹84.
- At the final NAV of 100, your SIP is worth ₹61,667.
- A ₹50,000 lumpsum on day one at NAV 100 would be worth just ₹50,000, because the market ended where it started.
In a steadily rising market the lumpsum wins (as in the earlier table); in a falling or choppy market the SIP often wins. Since nobody can predict which will happen, SIP is the lower-regret choice for most people, especially with monthly salary income.
Try it: Compare both routes for the same money and period with the SIP vs Lumpsum Calculator
Tax changes the picture
Equity mutual funds and FDs are taxed very differently (rules as of FY 2025-26):
- Equity funds: gains on units held over 12 months are long-term capital gains, taxed at 12.5% on gains above ₹1,25,000 in a financial year. Units held 12 months or less are taxed at 20%. Tax is due only when you sell.
- FD and RD: interest is added to your income and taxed at your slab rate every year, whether or not you withdraw it. Banks deduct TDS once interest crosses the threshold.
Here is the 10-year example after tax, for someone in the 30% slab (31.2% with cess). For simplicity, all equity units are sold at the end of year 10, and the ₹1,25,000 exemption is used once.
| Option | Value at 10 years | Approx. tax | After tax |
|---|---|---|---|
| SIP (equity fund) | ₹23,23,391 | ₹1,30,422 | ₹21,92,969 |
| Recurring deposit at 7% | ₹17,37,017 | ₹1,67,549 | ₹15,69,468 |
| Lumpsum (equity fund) | ₹37,27,018 | ₹3,12,262 | ₹34,14,756 |
| Fixed deposit at 7% | ₹24,01,917 | ₹3,74,998 | ₹20,26,919 |
The FD and RD figures are slightly generous: in reality their tax is paid every year, so less money stays invested to compound.
The gap widens after tax. A 7% FD earns only about 4.82% after 31.2% tax, which is below a typical 5–6% inflation rate, so the money barely holds its value in real terms. In the new tax regime at lower incomes, FD interest may be taxed lightly or not at all, which narrows the gap; see our tax regime guide.
Try it: Check FD maturity at your bank’s rate and compounding with the FD Calculator
Common mistakes to avoid
- Stopping SIPs when markets fall. A falling market is when a SIP buys the most units. Investors who stop at the bottom lock in the worst prices and miss the recovery.
- Judging a SIP after one or two years. Short-term SIP returns can be negative even in good funds. Review against your goal, not last month’s NAV.
- Putting short-term money in equity. If you need the money for a house down payment in 18 months, the risk of a 20–30% fall is not worth the extra return. Use an FD or RD.
- Ignoring the step-up. Raising your SIP by 10% each year as your salary grows has a large effect on the final corpus. Many fund houses let you set an automatic top-up.
- Breaking FDs early. Premature withdrawal usually costs a penalty of around 0.5–1% on the rate. Split a large FD into a few smaller ones (FD laddering) so you can break only what you need.
- Chasing last year’s top fund. Choose a low-cost diversified or index fund for core SIPs, and check the expense ratio, since a 1% difference in yearly cost compounds over decades.
Which one should you choose?
| Your situation | Usually suits |
|---|---|
| Salary income, goal 5+ years away (retirement, child’s education) | SIP in a diversified equity or index fund |
| A bonus or inheritance, goal 7+ years away | Lumpsum, or spread it over 6–12 months via SIP/STP if you worry about timing |
| Money needed within 1–3 years (house down payment, fees) | FD or RD |
| Emergency fund | FD with easy break, or savings account |
| Retired, need steady income | FD / senior citizen schemes for income, plus some equity for growth |
FDs also have advantages the table does not show: certainty of return, no market risk, and deposit insurance by DICGC of up to ₹5 lakh per depositor per bank. Equity funds have no guarantee, and SIPs can be paused or stopped without penalty, but the fund value can fall sharply in the short run. Most households use both: FDs for near-term goals and safety, SIPs for long-term wealth.
Try it: Already have a sum to invest? Model it in the Lumpsum Calculator
Frequently asked questions
Which grows money faster: SIP, lumpsum or FD?
Over long periods, equity lumpsum usually grows fastest because all the money is invested from day one, then SIP, then FD. At an assumed 12% equity return and 7% FD rate, ₹12 lakh grows to about ₹37,27,018 as a lumpsum and ₹24,01,917 in an FD over 10 years, while ₹10,000 a month grows to ₹23,23,391 via SIP.
Is SIP better than FD?
For goals 5 or more years away, SIPs in equity funds have historically offered higher returns than FDs, and equity gains are taxed more lightly. FDs are better for short-term goals and emergency money because returns are guaranteed and there is no market risk.
Is lumpsum better than SIP?
If you already have the money and the market rises steadily, lumpsum usually ends higher because the money is invested for longer. In falling or volatile markets, SIP often does better thanks to rupee cost averaging. If timing worries you, spread a lumpsum over 6 to 12 months.
How much will 10,000 per month SIP give in 10 years?
At an assumed 12% annual return, about ₹23,23,391 on ₹12 lakh invested. At 10% it is about ₹20,65,520, and at 8% about ₹18,41,657. Actual returns will differ.
How is SIP return taxed in India?
For equity funds, gains on units held over 12 months are taxed at 12.5% above ₹1.25 lakh of long-term gains per year, and units held 12 months or less at 20%. Each SIP instalment has its own 12-month holding period.
Is FD interest taxable?
Yes. FD and RD interest is added to your income and taxed at your slab rate each year, even if it is reinvested. Banks deduct TDS above the threshold; submit Form 15G or 15H if eligible and your income is below the taxable limit.
Related guides
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- How to Reduce Home Loan EMI and Interest
- New vs Old Tax Regime FY 2025-26: Which Saves More?
- CTC vs In-Hand Salary: How to Calculate Take-Home Pay
This guide is general information, not financial advice. Mutual fund investments are subject to market risk; past returns do not guarantee future results. Tax rules are as of FY 2025-26.