Rs 21,000 SIP vs Rs 11,000 Step Up SIP: Which will give higher return in long term? See estimates for 20, 25, and 30-year time frame
SIP vs Step-Up SIP: Whether you're saving for a house, car, retirement, your child's education or other things, proper financial planning is crucial to achieving your goals. It allows you to invest for the future without compromising your daily needs. If you're aiming to build a substantial corpus of around Rs 2 crore, a Systematic Investment Plan (SIP) in mutual funds can be an effective investment option. One of the key benefits of SIP is the power of compounding over the long term.
(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.)
SIP vs Step-Up SIP
There are two main types of SIPs to consider: Regular SIP and Step-Up SIP. In a Regular SIP, you invest a fixed amount consistently over time. In contrast, a Step-Up SIP involves increasing your SIP amount at regular intervals, which helps you reach your financial goal faster.
In this article, we will compare the returns from both types of SIPs over 20, 25, and 30-year periods, based on projections.
Regular SIP: How much you accumulate in 20 years with Rs 21,000 monthly SIP
If you invest Rs 21,000 per month in a Regular SIP, your total investment over 20 years will be Rs 50,40,000. Assuming an average annual return of 12 per cent, your expected capital gain would be Rs 1,59,42,106. Therefore, by the end of 20 years, your total corpus would grow to approximately Rs 2,09,82,106, as per the calculations.
Regular SIP: How much you accumulate in 25 years with Rs 21,000 monthly SIP
With Rs 21,000 invested monthly, your total contribution over 25 years will be Rs 63,00,000. Assuming an average annual return of 12 per cent, your expected capital gain will be Rs 3,35,50,337, calculation shows. By the end of 25 years, your corpus would grow to approximately Rs 3,98,50,337.
Regular SIP: How much you accumulate in 30 years with Rs 21,000 monthly SIP
In this case, if you invest Rs 21,000 monthly for 30 years, your total contribution will amount to Rs 75,60,000. With an average annual return of 12 per cent, your expected capital gain will be Rs 6,65,68,189, as per the calculations. At the end of 30 years, your corpus would grow to approximately Rs 7,41,28,189.
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 11,000 per month, increasing by 10 per cent annually over 20, 25, and 30 years.
What is Step-Up SIP?
Step-Up SIP involves gradually increasing your monthly investment at regular intervals (e.g., increasing by 10 per cent each year). This approach helps boost your contributions over time, allowing you to potentially accumulate more wealth.
Step-Up SIP: How much you accumulate in 20 years with Rs 11,000 monthly SIP and 10% step-up
If you invest Rs 11,000 per month, increasing the amount by 10 per cent each year, your total investment over 20 years will be Rs 75,60,300. Assuming a 12 per cent average annual return, your expected capital gain will be Rs 1,43,17,287, as per the calculations. By the end of 20 years, your corpus will grow to approximately Rs 2,18,77,587.
Step-Up SIP: How much you accumulate in 25 years with Rs 11,000 monthly SIP and 10% step-up
Calculations show that if you invest Rs 11,000 monthly and increase the amount by 10 per cent each year, your total investment in 25 years will be Rs 1,29,81,812. With an average annual return of 12 per cent, your expected capital gain will be Rs 3,40,49,195. By the end of 25 years, your corpus will grow to approximately Rs 4,70,31,007.
Step-Up SIP: How much you accumulate in 30 years with Rs 11,000 monthly SIP and 10% step-up
Investing Rs 11,000 monthly with a 10 per cent annual increase will result in a total investment of Rs 2,17,13,211 over 30 years. With a 12 per cent average annual return, your expected capital gain will be Rs 7,54,62,148, calculations show. At the end of 30 years, your corpus will grow to approximately Rs 9,71,75,359.
SIP Calculations: Important Note
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.
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.