SIP Vs Step-up SIP: Can you guess investment needed to create Rs 4 crore corpus in 20 years? See estimates at 12% return

SIP vs Step-Up SIP: If you're looking to build wealth, a mutual fund SIP (Systematic Investment Plan) can be an effective investment option. Mainly, there are two ways to invest in SIPs: Regular SIP and Step-Up SIP. So, which investment option is suitable for you? Find out-

Priya Vishwakarma | Nov 21, 2024, 02:06 PM IST

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SIP vs Step-Up SIP: If you're looking to build wealth, a mutual fund SIP (Systematic Investment Plan) can be an effective investment option. One of the key advantages of this is the power of compounding over the long term. Mainly, there are two ways to invest in SIPs:

1. Regular SIP: You invest a fixed amount consistently over time.
2. Step-Up SIP: You increase your SIP amount at regular intervals, which can help you reach your financial goal more quickly.

So, which investment option is suitable for you? It depends on how much money you can invest and how much time you have to reach your goal. To make this clear, let’s compare both strategies using the example of accumulating Rs 5 crore over 20 years.

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Regular SIP: How to Accumulate Rs 5 Crore in 20 Years

According to the SIP calculator, to accumulate Rs 5 crore with a regular SIP, you need to invest Rs 41,000 every month at an expected annualised return of 12 per cent for 20 years.

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Regular SIP: Your Total Contribution Over 20 Years

Over 20 years, your total investment will amount to Rs 98,40,000.

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Regular SIP: Expected Capital Gain at 12% Annual Return

Assuming an average annual return of 12 per cent, your expected capital gain after 20 years will be Rs 3,11,25,065.

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Regular SIP: Total Amount Received

Adding the two, your corpus will grow to approximately Rs 4,09,65,065 by the end of 20 years.

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Step-Up SIP

Now, let's move on to the Step-Up SIP calculation and determine how much you need to invest in this strategy. However, before we go into the calculations, let's first understand what Step-Up SIP is.

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What is Step-Up SIP?

Step-Up SIP, also known as Top-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.

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Step-Up SIP: How to Accumulate Rs 5 Crore in 20 Years

According to the Step-Up SIP calculator, to accumulate Rs 5 crore, you need to invest Rs 21,000 every month at an expected annualised return of 12 per cent for 20 years, increasing the amount by 10 per cent each year.

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Step-Up SIP: Your Total Contribution Over 20 Years

Over 20 years, your total investment will amount to Rs 1,44,33,300.

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Step-Up SIP: Expected Capital Gain at 12% Annual Return

Assuming an average annual return of 12 per cent, your expected capital gain after 20 years will be Rs 2,73,33,003.

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Step-Up SIP: Total Amount Received

Adding the two, your corpus will grow to approximately Rs 4,17,66,303 by the end of 20 years.

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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.

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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.

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