Rs 8,000 SIP vs Rs 5,000 Step Up SIP: Which will give higher return in 25, 30, and 35-year time frame?
SIP vs Step-Up SIP: When it comes to long-term investing, people are often confused about which option is suitable for them. There are plenty of investment options available in the market today, but among them, SIP is considered one of the most popular choices. There are two types of SIP: Regular SIP and Step-Up SIP.
(Disclaimer: This is not investment advice. The calculations presented are projections. Please do your own due diligence or consult a financial advisor for personalised advice.)
What is SIP?
Regular SIP is a systematic investment plan offered by many mutual funds, allowing investors to invest small amounts periodically instead of making lump-sum investments.
What is Step-Up SIP?
Step-Up SIP is a type of SIP where investors can automatically increase the SIP amount after a chosen time period (such as 6 or 12 months).
SIP vs Step-Up SIP: Comparison
In this write-up, we will compare the returns from both types of SIPs over 25, 30, 35, and 40-year time frames.
Annualised Return: Assuming 12%
For all the calculations, let's assume an annual return rate of 12 per cent which is also an average equity return for long-term investment.
Regular SIP: How much you accumulate in 25 years with Rs 8,000 monthly investment
Total Investment: Rs 24,00,000
Expected Capital Gain: Rs 1,27,81,081
Total Corpus Received: Rs 1,51,81,081
Regular SIP: How much you accumulate in 30 years with Rs 8,000 monthly investment
Total Investment: Rs 28,80,000
Expected Capital Gain: Rs 2,53,59,310
Total Corpus Received: Rs 2,82,39,310
Regular SIP: How much you accumulate in 35 years with Rs 8,000 monthly investment
Total Investment: Rs 33,60,000
Expected Capital Gain: Rs 4,86,02,153
Total Corpus Received: Rs 5,19,62,153
Regular SIP: How much you accumulate in 40 years with Rs 8,000 monthly investment
Total Investment: Rs 38,40,000
Expected Capital Gain: Rs 9,12,19,362
Total Corpus Received: Rs 9,50,59,362
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 7 per cent annually over 25, 30, 35, and 40 years.
Step-up SIP: How much you accumulate in 25 years with Rs 5,000 monthly investment
Total Investment: Rs 37,94,942
Expected Capital Gain: Rs 1,23,91,164
Total Corpus Received: Rs 1,61,86,106
Step-up SIP: How much you accumulate in 30 years with Rs 5,000 monthly investment
Total Investment: Rs 56,67,647
Expected Capital Gain: Rs 2,62,70,996
Total Corpus Received: Rs 3,19,38,644
Step-up SIP: How much you accumulate in 35 years with Rs 5,000 monthly investment
Total Investment: Rs 82,94,213
Expected Capital Gain: Rs 5,32,81,838
Total Corpus Received: Rs 6,15,76,051
Step-up SIP: How much you accumulate in 45 years with Rs 5,000 monthly investment
Total Investment: Rs 1,19,78,107
Expected Capital Gain: Rs 10,48,70,480
Total Corpus Received: Rs 11,68,48,587
Important Note For SIP Investors
Both, SIP and Step-Up SIP are market-linked investments in mutual funds that means returns depend on market performance and cannot be guaranteed. In long-term, SIPs typically offer an average return of around 12 per cent, however, actual returns can vary depending on market conditions.