Many investors find systematic investment plan (SIP) in mutual funds as a convenient way to build wealth in the long term, but what if they also top it up with a lump sum investment. By doing that, they can generate a significantly higher corpus compared to a simple step up SIP in the long run. Similarly, what will be the impact if you invest a Rs 5 lakh lump sum amount at the beginning of your Rs 10,000 step up investment journey? Will you be able to achieve a Rs 2 crore retirement corpus in 20 years?
Retirement corpus from Rs 10,000 monthly SIP, Rs 5 lakh lump sum investment in 20 years
Twenty years is a long duration. One aspiring for an approximately Rs 2 crore retirement corpus in that time can opt for equity mutual fund investment. Such funds are volatile, but they can deliver better growth compared to debt and hybrid funds in the long term.
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Assuming that your equity fund investments will give you an annualised return of 12% for 20 years and you will step up your Rs 10,000 SIP by 7% annually, here’s the corpus you can create in 20 years.
| Particulars | Amount |
| Step-up SIP | Rs 10,000 |
| Annual step-up (increase) | 7% |
| Initial lump sum investment | Rs 5 lakh |
| Annualised return | 12% |
| Step-up SIP corpus created in 20 years | Rs 1.48 crore |
| Lump sum corpus created in 20 years | Rs 48 lakh |
| Total retirement corpus | Rs 1.96 crore |
You can generate a nearly Rs 2 crore corpus in 20 years, but if you continue the same investment for just one more year, your retirement corpus can reach Rs 2.24 crore as the power of compounding shows its impact more in the long term. However, to reach that stage, the key is consistency, where you need to keep investing during times even when the market is at its worst.
Consistency is the key
Rohan Goyal, investment research analyst, MIRA Money, told ET Wealth Online that one key lesson when targeting a Rs 2 crore retirement corpus from a Rs 10,000 step-up SIP and Rs 5 lakh lump sum is that one should not stop their SIP in falling markets.
“Investors who stop SIPs during a fall and restart after recovery do not just miss the best buying window, but they also permanently break the chain of compounding,” says Goyal.
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Vijay Kuppa, CEO, InCred Money, says an investor should use a combination of both for rupee cost averaging and also making opportunistic market investments in times of significant corrections.
Increase your investment with time
Experts advise increasing your investment with a rise in your income as it helps create a substantial retirement corpus that adjust to your rising lifestyle expenses.
Giving an example, Goyal says Priya, 35, gets a bonus of Rs 5 lakh this year and invests it immediately in a diversified equity fund. She also starts a SIP of Rs 10,000 per month in the same fund. By 55, assuming a 12% annualised return, the lump sum has grown to Rs 48 lakh, and the SIP corpus is approximately Rs 1 crore (without step-up).
But if she steps up her SIP by just 10% each year, the SIP corpus alone crosses Rs 1.5 crore, and the combined total breaches the Rs 2 crore mark.
Sometimes, many people may not find it easy to increase their SIP amount at a certain percentage. On the other hand, investors with less liabilities may increase the step up amount at a higher rate than 10%. Is there a thumb rule about the percentage of step up that investors should follow?
What should be percentage of yearly step up SIP
Goyal says the recommended step-up for most salaried investors is 10-15% per year, which roughly mirrors average salary growth and keeps the investment aligned with income.
Goyal suggests more aggressive earners or those starting at lower SIP amounts to opt for a 15-20% annual step up.
“As a rule of thumb, every time you get an increment or bonus, you should revisit your SIP amount. Even a Rs 2,000 increase per year compounded over 15-20 years makes a material difference to the final corpus,” says Goyal.
Jashan Arora, director, Master Capital Services Limited, says a step up SIP investment aligns with rising income levels while also helping investors combat inflation and strengthen long-term retirement and wealth creation goals.
Retirement corpus generated in 20 years at different step up percentages (At 12% annualised return)
| SIP amount | Annual step up | Corpus in 20 years |
| Rs 10,000 | 5% | Rs 1.27 cr |
| Rs 10,000 | 8% | Rs 1.59 cr |
| Rs 10,000 | 10% | Rs 1.86 cr |
| Rs 10,000 | 12% | Rs 2.20 cr |
| Rs 10,000 | 15% | Rs 2.86 cr |
Where to invest?
Another important question is where should you invest your lump sum amount and SIP to get the maximum output.
Goyal suggests one should avoid parking a lump sum in a conservative fund with the intention of shifting to equity ‘when the time is right.’
Another important factors that Goyal recommends is that one should not let their SIP run on autopilot for 20 years without a single review.
“A fund that was excellent in year one may have seen significant management or strategy changes by year ten. Review your portfolio annually, not to churn it, but to ensure the fund continues to meet the performance and quality criteria it was selected for. Replace only when there is a clear and sustained deterioration, not because of one bad quarter,” says Goyal.
For lump sum investments, Arora says they should be best deployed in a calibrated manner during market corrections or periods of heightened volatility rather than at elevated valuations.
Hence, the key to generate a Rs 2 crore corpus from a Rs 10,000 step SIP and Rs 5 lakh lump sum is to pick the right funds, stay consistent in investments, and increase the SIP amount with a rise in income.
