Rs 4,000 SIP Vs Rs 2,000 Step-up SIP: Which one can give higher return in 30 years?
SIP vs Step-Up SIP: Every parent, whether a mother or father, dreams of seeing their child’s wedding in style. However, with rising inflation, this dream seems increasingly difficult to achieve in the future. But if you start saving and investing strategically now, achieving this goal can be within reach.
To make the dream wedding possible, you need to build a substantial corpus of at least Rs 1 crore. And if you're looking to build wealth, a mutual fund SIP (Systematic Investment Plan) can be an effective investment option for you. One of its key advantages is the power of compounding over the long term. There are mainly two types of SIPs that you can consider:
Regular SIP: You invest a fixed amount consistently over time.
Step-Up SIP: You increase your SIP amount at regular intervals, helping you reach your financial goal faster.
So, which investment option will yield higher returns? The answer depends on how much you can invest and how much time you have to reach your goal. To make this clearer, let’s compare both strategies using an example over 30 years.
(Disclaimer: This is not investment advice. Calculations are projections. Please do your own due diligence or consult an advisor for retirement planning.)
Regular SIP: How much you accumulate in 30 years with Rs 4,000 monthly SIP
According to the SIP calculator, if you invest Rs 4,000 monthly in SIP, your total investment amount in 30 years will be Rs 14,40,000.
Regular SIP: Expected Capital Gain at 12% Annual Return
Assuming an average annual return of 12 per cent, your expected capital gain after 30 years will be Rs 1,26,79,655.
Regular SIP: Total Amount Received
Adding the two, your corpus will grow to approximately Rs 1,41,19,655 by the end of 30 years.
Step-Up SIP
Now, let's move on to the Step-Up SIP calculation and determine how much you accumulate in 30 years with Rs 2,000 monthly SIP. However, before we go into the calculations, let's first understand what Step-Up SIP is.
What is Step-Up SIP?
Step-Up SIP involves periodically increasing your SIP amount. For example, if you start with a SIP of Rs 5,000 and increase it by 10 per cent each year, your investment amount will gradually rise over time.
Step-Up SIP: How much you accumulate in 30 years with Rs 2,000 monthly SIP and 10% step-up
According to the Step-Up SIP calculator, if you invest Rs 2,000 monthly and increase the amount by 10 per cent each year, your total investment amount in 30 years will be Rs 39,47,857.
Step-Up SIP: Expected Capital Gain at 12% Annual Return
Assuming an average annual return of 12 per cent, your expected capital gain after 30 years will be Rs 1,37,20,391.
Step-Up SIP: Total Amount Received
Adding the two, your corpus will grow to approximately Rs 1,76,68,247 by the end of 30 years.
SIP Calculation: Important Note
Both Regular SIP and Step-Up SIP are market-linked investments in mutual funds. This means the returns depend on market performance and cannot be guaranteed. While experts suggest that long-term SIPs can yield an average return of around 12 per cent, actual returns may vary depending on market conditions.
SIP vs Step-Up SIP: Conclusion
In conclusion, both Regular SIP and Step-Up SIP can help you build wealth over time. However, Step-Up SIP might be a more aggressive strategy for those who want to reach their financial goals faster.