Power of Compounding: Rs 2,000 regular SIP vs Rs 2,000 step up SIP; how you can generate Rs 1,18,08,907 extra corpus with just 5% step up
Can a simple 5 per cent step-up in your Rs 2,000 SIP help you generate Rs 1.18 crore extra? Let’s find out how game-changing power of compounding and how small increases in your investment can create a sizeable wealth.
Compounding is a powerful way to grow your money in the long run, increasing your investment amount slightly can make a sea change in your end corpus. Imagine starting with Rs 2,000 monthly SIP. Now, instead of keeping it the same, you increase it by just 5 per cent every year. This small step can help you build Rs 1.18 crore more in the long term. It’s like adding a little extra fuel each year to your investment and watching it grow faster. Let’s break down the calculations and see how this simple step can help you create a much bigger corpus.
Photos source: Pixabay/Representational
(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)
What is SIP?
A systematic investment plan (SIP) is a method of investing a fixed amount in a mutual fund (s) scheme. The investors can contribute according to their choice, they can even start with a small amount of Rs 100.
What is step up SIP?
Step-up SIP is a method of increasing your SIP investment amount by a fixed amount of percentage, at regular intervals, either half-yearly or annually.
What are the benefits of SIP?
Convenient investment method
Cost-effective: Investing through SIP is cost-effective, it minimises the financial burden on investors.
What are the benefits of step up SIP?
Flexibility - one can adjust their investment levels to their financial situation.
Disciplined savings - one can use a step-up SIP to help achieve their financial goals faster.
Power of Compounding: SIP Calculation conditions
Target corpus: Rs 2 crore
Monthly investment: Rs 2,000
Target period: 39 years
Annualised return: 12 per cent
What will be your retirement corpus with Rs 2,000 monthly SIP in 39 years?
The investment amount will be Rs 9,36,000. The estimated capital gains will be Rs 2,01,31,354, and the estimated retirement corpus will be Rs 2,10,67,354.
How long it will take to generate Rs 2 crore corpus with Rs 2,000 monthly SIP investment?
It will approximately take 39 years to generate Rs 2 crore corpus with Rs 2,000 monthly SIP investment.
Power of Compounding: Step up SIP Calculation conditions
Monthly investment: Rs 2,000
Target period: 39 years
Annualised return: 12 per cent
Annual step up: 5 per cent
What will be your retirement corpus with Rs 2,000 monthly step up SIP investment?
The investment amount will be Rs 27,38,281. The estimated capital gains will be Rs 3,01,37,981, and the estimated retirement corpus will be Rs 3,28,76,261.
How you can generate Rs 1,18,08,907 extra corpus with just 5 per cent step up
With Rs 2,000 monthly SIP one can generate an estimated corpus of Rs 2,10,67,354, at 12 per cent annualised return. On the other hand, in a step up SIP, one can generate an estimated corpus of Rs 3,28,76,261 by increasing the amount 5 per cent annually.