Power of Compounding on a Lumpsum
Albert Einstein is often (mis)quoted as calling compound interest "the eighth wonder of the world". On a lumpsum, compounding works like this:
Future Value = P × (1 + r/100)^n
₹5,00,000 Lumpsum — Where Does It Grow?
| Years | @ 8% | @ 12% | @ 15% |
|---|---|---|---|
| 5 | ₹7,34,664 | ₹8,81,182 | ₹10,05,694 |
| 10 | ₹10,79,462 | ₹15,52,924 | ₹20,22,786 |
| 20 | ₹23,29,779 | ₹48,23,547 | ₹81,83,294 |
| 30 | ₹50,31,328 | ₹1,49,79,605 | ₹3,31,20,400 |
When Lumpsum Beats SIP
- You receive a windfall (bonus, sale proceeds, inheritance)
- Markets have corrected sharply — buying cheap NAVs
- You want exposure to a long-horizon goal immediately
- You pair it with a small ongoing SIP for discipline