A systematic investment plan (SIP) is one of the best ways to invest in a disciplined way and grow your wealth. Through SIP you invest a fixed amount on a regular basis, typically monthly, in your selected mutual fund scheme or other investment vehicles. This helps you leverage the power of compounding to create long-term wealth. But why keep the investment amount fixed? As you progress your career, your income also grows, and it makes sense to increase your monthly SIP contributions so you can meet all your financial goals earlier or create greater wealth over time!
That’s where step-up SIP helps. Step-up SIP is a smart tool that allows you to increase your SIP instalment by a fixed amount or percentage at predetermined intervals, typically yearly. This ensures your investment contribution stays aligned with inflation and your income growth.
Here’s how it works. Imagine you start a regular monthly SIP of ₹5,000 for 15 years. Each month ₹5,000 is automatically invested in mutual funds from your bank account.
Now, let’s switch things up with a step-up SIP. You start with the same amount of ₹5,000, but you decide to increase this amount by 10% every year using step-up option. So, for the first year, you invest ₹5,000 each month. In the second year, your monthly investment grows to ₹5,500, and it continues to increase by 10% annually. This step-up approach gradually boosts your investment over time. Let's explore how a step-up of 10% can enhance your wealth.
|
Regular SIP |
Step-up SIP |
| Investment amount |
₹5,000 |
₹5,000 |
| Investment Period |
15 yrs |
15 yrs |
| Expected return |
12% |
12% |
| Annual Step-up |
None |
10% |
After 15 years
| Total invested in 15 yrs |
₹19,06,349 |
₹9,00,000 |
| Estimated returns |
₹22,31,010 |
₹14,79,657 |
| Total Value |
₹41,37,359 |
₹23,79,657 |
Using a step-up of 10% yearly, you invested a total of ₹19lacs instead of ₹9lacs and you created a wealth of ₹41lacs nearly double of ₹24lacs you would have done in a regular SIP.
How does Step-up SIP Calculator work?
With Arihant’s Step-up SIP Calculator, you can visualize how your wealth multiplies when the SIP contribution increases at regular intervals - monthly, quarterly, half-yearly or yearly. Just enter your SIP amount, step-up percentage, tenure, and expected returns, and it will project your investment growth over time, helping you plan for a financially secure future.
This tool is great for motivating long-term wealth creation, promoting disciplined investing with incremental contributions to achieve your financial goals.
Formula of Step-up SIP Calculator
The step-up SIP calculator uses the following formula:
FV=SIP×(r(1+r)n−1 )×(1+r)
where,
SIP = Initial monthly investment
r= expected monthly return
n= total month of investment
Benefits of Step-up SIP Calculator
1. Future projections:
Step-up SIP calculator helps you estimate the future value of investment by factoring in increasing contribution, compounding returns and investment duration.
2. Financial Planning:
Investing should always be mapped to your goals and every goal should be quantified. When you know how much money you need for each goal, you can use this calculator and estimate what your SIP contributions should be to help you achieve them. This ensures a disciplined and structured investment approach.
3. Maximizes Wealth Creation:
Increasing SIP investments over time leads to higher returns compared to a fixed SIP. By using Step-up calculator, you can visualize the impact of step-up contributions, making it easier to optimize investments for better financial growth.
Sum Up
Try Arihant’s Step-up Calculator to estimate future projections, align SIP increments with income growth, and ensure disciplined financial planning. With easy-to-use features, it simplifies investment decisions, making goal-based investing more efficient and effective.
Creating wealth is not hard. All you need to have a disciplined approach and right strategy!