Rs 10 Lakh Lump Sum vs Rs 50 Lakh One-time Investment: 3 ways how your Rs 10 lakh investment can generate higher corpus than what Rs 50 lakh can

Rs 10 Lakh Lump Sum vs Rs 50 Lakh Lump Sum: When we want to create a corpus from our mutual fund lump sum investment, the amount matters. But what matters more is the duration of it. The power of compounding rewards a patient investor far more than a person who starts with a big investment but late.

In this write-up, we project 3 scenarios of how a Rs 10 lakh one-time investment, invested earlier, can generate a larger corpus than what Rs 50 lakh invested later can. 

Power of compounding 

The power of compounding, often considered the 8th wonder of the world, can turn an investment into a corpus multiple times the principal. Every new compounding period, investment growth is credited to the previous year's growth, and the corpus rises faster with time.

Let's see how your Rs 1 lakh investment at a 12 per cent annualised return can grow in 10, 20, 30, and 40 years.

In 10 years, estimated capital gains will be Rs 2,10,585, and the estimated corpus will be Rs 3,10,585.

In 20 years, estimated capital gains will be Rs 8,64,629, and the estimated corpus will be Rs 9,64,629.

In 30 years, estimated capital gains will be Rs 28,95,992, and the estimated corpus will be Rs 29,95,992.

In 40 years, estimated capital gains will be Rs 92,05,097, and the estimated corpus will be Rs 93,05,097.

If you look at the decadal growth, you can see that the corpus is growing faster every 10 years. 

Smaller vs larger investment 

The power of compounding can generate surprising results when a smaller amount is invested for a longer period as against a larger amount invested for a shorter period. 

Take the example of a Rs 2 lakh mutual fund lump sum investment for 35 years compared to a Rs 20 lakh investment for 14 years.

Estimated capital gains generated from a Rs 2 lakh investment in 35 years will be Rs 1,03,59,924, and the estimated corpus will be Rs 1,05,59,924.

Estimated capital gains created from a Rs 20 lakh investment in 14 years will be Rs 77,74,225, and the estimated corpus will be Rs 97,74,225.

Calculations for story

We will present 3 scenarios of how a Rs 10 lakh mutual fund lump sum investment can create a larger fund compared to what a Rs 50 lakh one-time investment can.

We will take a 12 per cent annualised return for all 3 scenarios. 

Rs 10 lakh investment for 25 years vs Rs 50 lakh investment for 10 years

In 25 years, a Rs 10 lakh investment will generate estimated capital gains of Rs 1,60,00,064 and an estimated corpus of Rs 1,70,00,064. 

In 10 years, a Rs 50 lakh investment will generate estimated capital gains of Rs 1,05,29,241 and an estimated corpus of Rs 1,55,29,241.

Rs 10 lakh investment for 30 years vs Rs 50 lakh investment for 15 years

In 30 years, a Rs 10 lakh investment will generate estimated capital gains of Rs 2,89,59,922 and an estimated corpus of Rs 2,99,59,922. 

In 15 years, a Rs 50 lakh investment will generate estimated capital gains of Rs 2,23,67,829 and an estimated corpus of Rs 2,73,67,829. 

Rs 10 lakh investment for 40 years vs Rs 50 lakh investment for 25 years

In 40 years, a Rs 10 lakh investment will generate estimated capital gains of Rs 9,20,50,970 and an estimated corpus of Rs 9,30,50,970. 

In 25 years, a Rs 50 lakh investment will generate estimated capital gains of Rs 8,00,00,322 and an estimated corpus of Rs 8,50,00,322.

Conclusion

You can see that in all 3 scenarios, a Rs 10 lakh investment is generating a higher corpus compared to a Rs 50 lakh investment. It's because the extra years of compounding are making the smaller amount a clear winner. 

(Disclaimer: This is not investment advice. Do your own due diligence or consult an expert for financial planning.)