SIP vs Step Up SIP: Which can help generate larger corpus on Rs 12,000 monthly investment for 30 years; see calculations

Let’s find out which investment in mutual fund SIP or Step Up SIP can help generate a large corpus on the monthly investment of Rs 12,000 for 30 years.

Anamika Singh | Dec 05, 2024, 03:24 PM IST

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Systematic Investment Plans (SIPs) and Step-up SIPs are popular ways to build a satisfactory corpus over time. It involves disciplined and consistent investments in mutual funds. While a regular SIP involves fixed monthly contributions, a Step-Up SIP allows an increase in the investment amount at regular intervals. Thus, investors may face confusion when choosing between a regular SIP and a Step-Up SIP, if they are to make a choice. Therefore, through this article, you can understand which investment scheme between SIP and Step-up can help you build a larger corpus with Rs 12,000 monthly investment in 30 years.

Photos source: Pixabay/Representational

(Disclaimer: Our calculations are projections and not investment advice. Do your due diligence or consult an expert for financial planning)

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What is SIP?

A systematic investment plan (SIP) is a method of investing in a mutual fund SIP where an individual invests a fixed amount regularly to fulfill their financial goals.

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What is Step-up SIP

A step-up SIP allows investors to increase their SIP contributions by a fixed amount or percentage at regular intervals.

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Example to understand Step-up SIP

For example, as an investor, if you start a monthly SIP of Rs 10,000, the amount can increase by 5% or 10% after a year. Resulting in Rs 500 or Rs 1,000 increase in SIP amount.

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SIP vs Step-up SIP

Flexibility: In step-up SIP one can register a gradual increase in SIP amount. Whereas, regular SIP maintains a consistent SIP amount throughout the tenure.

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SIP: Calculations

For a better understanding, we will break the investment years. First, we will find out in 10 years, then 20, and then we will do the calculations of 30 years.

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How much corpus one can generate on Rs 12,000 monthly investment for 10 years at 12 per cent annualised return in regular SIP?

The estimated corpus will be Rs 27,88,069. During this time, the invested amount will be approximately Rs 14,40,000, and the estimated capital gains will be Rs 13,48,069.

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How much corpus one can generate on Rs 12,000 monthly investment for 20 years in regular SIP?

The estimated corpus will be Rs 1,19,89,775 at 12 per sent annualised reurn. During this time, the invested amount will be approximately Rs 28,80,000, and the estimated capital gains will be Rs 91,09,775.

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How much corpus one can generate on Rs 12,000 monthly investment for 30 years in regular SIP?

The estimated corpus will be Rs 4,23,58,965. During this time, the invested amount will be approximately Rs 43,20,000, and the estimated capital gains will be Rs 3,80,38,965.

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Step Up SIP: calculations

Here, we will break the calculation into 10 years each plus we will calculate at 5 per cent annual step up and 12 per cent annualised return.

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Step Up SIP: How much corpus one can generate on Rs 12,000 monthly investment for 10 years?

The estimated corpus will be Rs 33,44,331 at 5 per cent annual step up and 12 per sent annualised reurn. During this time, the invested amount will be approximately Rs 18,11,217, and the estimated capital gains will be Rs 15,33,114.

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Step Up SIP: How much corpus one can generate on Rs 12,000 monthly investment for 20 years?

The estimated corpus will be Rs 1,64,85,148. During this time, the invested amount will be approximately Rs 47,61,497, and the estimated capital gains will be Rs 1,17,23,651.

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Step Up SIP: How much corpus one can generate on Rs 12,000 monthly investment for 30 years?

The estimated corpus will be Rs 6,32,80,871. During this time, the invested amount will be approximately Rs 95,67,194, and the estimated capital gains will be Rs 5,37,13,677.

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