Step-Up SIP Calculator for Wealth Creation:If you want to deposit a corpus of Rs 1 crore in the next 20 years, then you can do so with the help of step-up SIP. Starting with an investment of just Rs 5000 every month can take you to your goal. Provided that you are getting 12% annual return on your investment and you keep increasing your investment by 10% every year through step-up SIP. This is a smart strategy, which gives you the opportunity for wealth creation in the long term. Step Up SIP is considered a better way to build a corpus for retirement or achieve financial freedom. Let us know how Step Up SIP works and how it can create huge wealth.
What is Step Up SIP?
Most investors know about Systematic Investment Plan (SIP), in which the amount invested every month remains fixed. Whereas, in Step Up SIP, investors have to increase their SIP amount in a fixed proportion every year. Its advantage is that you can increase your investment according to the increase in your income in the coming time. Due to this, your investment amount and the fund value received on maturity keep increasing gradually.
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How to build a big fund through step-up SIP?
Suppose you invest Rs 5000 every month in SIP and increase it at the rate of 10% every year. If you get an annual return of 12% on this investment, then your total investment amount in 20 years will be Rs 34.37 lakh, on which you will get an estimated return of Rs 65.08 lakh. In this way, after 20 years your total fund will be Rs 99.44 lakh. At the same time, if you do not use Step Up SIP and keep investing fixed Rs 5000, then after 20 years your total amount will be only Rs 49.46 lakh.
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This is how you can raise Rs 1 crore through step-up SIP
- Monthly SIP amount: Rs 5000
- Annual step-up in SIP: 10%
- Potential annual return: 12%
- Investment period: 20 years
- Amount invested through SIP in 20 years: Rs 34.37 lakh
- Total expected return in 20 years: Rs 65.08 lakh
- Total fund value after 20 years: Rs 99.44 lakh (with step-up)
- Total fund value after 20 years: Rs 49.46 lakh (without step-up)
- Return difference between investment with and without step-up: Rs 49.98 lakh
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Why is Step Up SIP better than regular SIP?
In Step Up SIP, investors get the facility to increase their monthly investment amount regularly, which is not possible in regular SIP. An example of this is also found in the above calculation, which shows that if you adopt the strategy of step-up SIP instead of normal SIP, then after 20 years your fund value can be more by about Rs 50 lakh. It is clear from this that if there is scope in your budget to increase SIP regularly, then this strategy can be very beneficial for you in the long run.
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For whom is Step Up SIP right?
This investment strategy is better for those investors whose income is expected to increase over time. Such people can create a larger corpus in the long term through Step Up SIP. A big advantage of step-up SIP is that you can protect your future needs from the impact of inflation. This is because due to inflation the purchasing power of money keeps decreasing with time. Due to continuously increasing the investment amount in Step Up SIP, the effect of inflation is reduced and the value of investment remains better with time. Through the step-up SIP strategy, you can invest in many different categories of funds. To achieve the 12% annual return that we have expected in the above example, one may have to invest in equity funds. But investing in equity is risky, hence you should take the investment decision keeping in mind your risk tolerance and financial goals.
(Disclaimer: The purpose of this article is only to provide information, not to recommend investment. Take any investment decision only after getting complete information and taking the opinion of your investment advisor.)
