SIP vs Step-up SIP: To build a substantial corpus in the long term, there are many investment options available in the market. One of these is an SIP mutual fund. It is a market-linked investment where an investor can invest money at regular intervals according to their financial capacity.
Well, there are several types of SIP available, but two of the most common are –
- Regular SIP: This is an investment option where an investor can invest a fixed amount regularly based on their financial capacity.
- Step-Up SIP: This is a type of SIP where investors are allowed to increase their monthly contribution annually.
Both options are useful in their own ways. However, which one is more suitable for your financial goal depends on how much money you can invest and the time you have to reach your goal. To make this clear, we will compare two strategies.
SIP Investment: 2 scenarios
In this write-up, we will take two scenarios.
First — SIP investment of Rs 10,000 for 20 Years
Second — Step-up SIP investment of Rs 5,000 for 30 years with a 5% increase per year.
Now, can you guess which one may generate a higher corpus? Let’s calculate.
Assuming 12% annualised return rate
For all calculations, we are assuming an annualised return rate of 12 per cent.
Also Read: SIP vs PPF for Rs 99,999/year investment: Which can create higher corpus in 15 years?
SIP Investment: How much corpus can you generate in 20 years with Rs 10,000 monthly investment?
According to the calculation, you can generate approximately Rs 91 lakh corpus in 20 years with Rs 10,000 monthly SIP investment.
Rs 10,000 SIP for 20 Years: Full Calculations at 12% Return Rate
- Total Investment: Rs 24,00,000
- Expected Capital Gain: Rs 67,98,574
- Total Corpus: Rs 91,98,574
Now, let’s move on to the second scenario, i.e., step-up SIP with Rs 5,000 monthly investment, and calculate how much corpus one can generate in 30 years. It should be noted that the amount will be increased by 5 per cent each year.
Step-up SIP Investment: How much corpus can you generate in 30 years with Rs 5,000 monthly investment?
If you invest Rs 5,000 monthly in SIP, with a 5 per cent step-up each year, then you can generate approximately Rs 2.33 crore corpus in 30 years, the calculation shows.
Rs 5,000 Step-up SIP for 30 Years: Full Calculations for 12% Return Rate
- Total Investment: Rs 39,86,331
- Expected Capital Gain: Rs 1,93,92,756
- Total Corpus: Rs 2,33,79,087
(Disclaimer: Our calculations are projections and not investment advice. Do your own due diligence or consult an expert for financial planning.)
