Rs 10,000 SIP vs Rs 5,000 Step-Up SIP: Which will give higher return in 20, 30, and 40-year time frame?
SIP vs Step-Up SIP: When it comes to securing a stable financial future, there are plenty of investment options available in the market. However, SIP and Step-Up SIP are among the two most popular choices in India.
(Disclaimer: This is not investment advice. The calculations presented are projections. Please do your own due diligence or consult a financial advisor for personalized advice.)
What is SIP?
SIP, or Regular SIP, is a systematic investment plan offered by many mutual funds. It allows investors to invest small amounts periodically, rather than making lump sum investments.
Power of Compounding
Additionally, SIP allows you to take advantage of the power of compounding, offering the potential for market growth over time.
What is Step-Up SIP?
Step-Up SIP is a type of SIP in which investors can automatically increase the SIP amount after a chosen time period (such as 6 or 12 months).
Which is Better: Regular SIP or Step-Up SIP?
The choice between a regular SIP and Step-Up SIP depends on individual financial goals, risk appetite, and preferences.
Comparison between SIP and Step-Up SIP
In this write-up, we will compare the returns from both types of SIPs over 20, 30, and 40-year periods.
Regular SIP: How much you accumulate in 20 years with Rs 10,000 monthly SIP
Total Investment: Rs 24,00,000
Expected Capital Gain: Rs 75,91,479
Total Corpus Received: Rs 99,91,479
Regular SIP: How much you accumulate in 30 years with Rs 10,000 monthly SIP
Total Investment: Rs 36,00,000
Expected Capital Gain: Rs 3,16,99,138
Total Corpus Received: Rs 3,52,99,138
Regular SIP: How much you accumulate in 40 years with Rs 10,000 monthly SIP
Total Investment: Rs 48,00,000
Expected Capital Gain: Rs 11,40,24,202
Total Corpus Received: Rs 11,88,24,202
Step-UP SIP Calculations
Now, let’s look at the Step-Up SIP and calculate how much you can accumulate with an initial investment of Rs 5,000 per month, increasing by 10 per cent annually over 20, 30, and 40 years.
Step-up SIP: How much you accumulate in 20 years with Rs 5,000 monthly SIP
Total Investment: Rs 34,36,500
Expected Capital Gain: Rs 65,07,858
Total Corpus Received: Rs 99,44,358
Step-up SIP: How much you accumulate in 30 years with Rs 5,000 monthly SIP
Total Investment: Rs 98,69,641
Expected Capital Gain: Rs 3,43,00,976
Total Corpus Received: Rs 4,41,70,618
Step-up SIP: How much you accumulate in 40 years with Rs 5,000 monthly SIP
Total Investment: Rs 2,65,55,553
Expected Capital Gain: Rs 14,86,64,563
Total Corpus Received: Rs 17,52,20,116
SIP Investment: Important Note For Investors
Both Regular SIP and Step-Up SIP are market-linked investments in mutual funds, meaning returns depend on market performance and cannot be guaranteed. While long-term SIPs typically offer an average return of around 12 per cent, actual returns can vary depending on market conditions.
SIP vs Step-Up SIP: Conclusion
Both Regular SIP and Step-Up SIP can be effective strategies for building wealth over time. However, the Step-Up SIP may be a more aggressive approach for those looking to reach their financial goals more quickly or higher in the same time period with a small investment compared to SIP.
SIP vs Step-Up SIP: Choice depends on your financial goals
In the long term, Step-Up SIP can lead to higher returns due to the increased investment amounts over time, especially if you can afford to increase your SIP each year. Ultimately, the choice between Regular SIP and Step-Up SIP depends on your financial goals, risk tolerance, and ability to increase your contributions over time.