A lumpsum parked before an equity SIP ladder

The ladder is five lumpsums, not one SIP button

A yearly ladder of ₹1,00,000 from a ₹5,00,000 bonus is a series of lumpsums. The lumpsum calculator prices one of them at a time. The first ₹1,00,000 at 10% for five years is ₹1,61,051. The second waits a year at 7%, becomes ₹1,07,000, then compounds at 10% for four years, about ₹1,56,659. The later slices are ₹1,52,386, ₹1,48,230 and ₹1,44,188. Added, about ₹7,62,514.

All ₹5,00,000 at 10% from today, same five years, is ₹8,05,255. The ₹42,741 difference is what the assumed 10% would have earned on the money that was still parked. If the parked rate were the same 10%, waiting would not change the ending value of money that is invested for the full period. The gap exists because 7% is lower than 10% on purpose.

Why people wait anyway

The ladder is a behaviour, not a higher return. It is for a sum you would sell in a hurry if it fell the week after you invested it. Spreading the entry means a fall hits only the slices already moved. The cost, in this sketch, is about ₹42,741 of assumed growth. If that cost is worth sleeping, the ladder is the plan. If you will hold the full amount either way, the day-one lumpsum is the larger number at these rates.

Calling the parking "debt" does not create a rate. Seven percent is whatever you type. A deposit, a fund, or a savings balance will not match it unless the product you picked does. Use the rate you were offered for the parking years, and a rate you will still accept for the years after the slice is invested.

• Day one, ₹5 lakh at 10% for 5 years: ₹8,05,255.
• Five slices, 7% while waiting and 10% after: about ₹7,62,514.
• Gap: about ₹42,741, which is the cost of the wait at these assumptions.

How to check one slice on the calculator

For a slice that waits two years, run ₹1,00,000 at 7% for 2 years. The result is the amount you then invest. Run that result at 10% for the years left, here 3. That second screen is the slice's ending value. Repeat for each wait. Add the five endings. The site will not add them.

The SIP calculator is the tool for the monthly amount you start alongside this, from salary. It assumes each instalment from month one. It is not a model of cash sitting at 7% and moving later. Mixing the two tools into one compounded total, without the hand steps above, double-counts or drops the waiting years.

Tax and the emergency fund sit outside both bars

Neither bar is after tax. Shifting a slice from the parking place into a fund can be a sale. This page does not compute that tax. If the ₹5,00,000 includes the emergency fund, the ladder is the wrong job. Money you may need next month does not go into a five-year equity assumption, in slices or at once.

Write the emergency fund out of the bonus first. Ladder only the surplus. A ₹5,00,000 figure that leaves you with no cash is a larger risk than the ₹42,741 gap.

Worked example: ₹5 lakh, five yearly slices

Parking is an assumed 7% a year. Once a slice is invested, the rest of the five years is an assumed 10%. Replace both before you use the gap as a decision.

Price the day-one lumpsum in one screen. Price each waiting slice as two screens, first at the parking rate, then at the invested rate for the years left. Add the slices. The difference is the cost of the ladder, not a return you lost in cash.

Sources

• FinanceChacha lumpsum calculator, one amount and one rate at a time
• FinanceChacha SIP calculator, for a monthly debit that is not this bonus