Personal Finance

How A Step-Up SIP Calculator Can Transform Your Savings

When it comes to investment, financial advisors always suggest that one should choose a systematic investment plan (SIP) for a better return on investment. SIPs are a great way to invest in stocks and mutual funds while reducing the impact of market volatility. But what if we tell you that sticking to a traditional SIP can leave a lot of money on the table! Here’s where a step-up SIP calculator comes in handy.

What is a Step-Up SIP Calculator?

What is a Step-Up SIP Calculator?

A step up SIP calculator is a tool designed to help investors increase their SIP amount periodically. In essence, it works by gradually increasing the investment amount by a specific percentage each year. The investor can choose the percentage they want to increase their investment by, and the calculator will show how much they can earn over a period of time.

Multi-Cap Mutual Funds and Step-Up SIP Calculator

Multi-cap mutual funds are one of the best investment options for investors who want to earn a good return on their investment. As the name suggests, these funds invest in stocks across different market capitalizations. Since they are diversified, the risk is minimized, and the returns are optimized.

By using a step-up SIP calculator, investors can earn a higher return on their multi-cap mutual fund investment. The calculator’s algorithm allows investors to increase their investment amount gradually, leading to a higher corpus in the long run.

Let’s take an example – Suppose you are investing INR 10,000 per month in a multi-cap mutual fund SIP at a rate of 12% p.a. (Assuming a rate of return of 12% p.a. over the next 20 years). Your total investment over the next 20 years would be INR 24 lakhs, and the corpus you accumulate would be INR 99,91,479 lakhs.

Now let’s say that you use a step-up SIP calculator to increase your investment amount by 5% each year. In the first year, you will invest INR 10,000, in the second year INR 10,500, in the third year INR 11,025, and so on. In this scenario, your total investment over the next 20 years would be INR 39.67 lakhs, and the corpus you accumulate would be INR 1.27crores. This means that by simply increasing your investment amount by 5% each year, you would have earned an additional INR 27,62,244 lakhs.

Another scenario to consider would be increasing your SIP amount at a higher rate of 10% p.a. In this case, your total investment over the next 20 years would be INR 68.73 lakhs, and the corpus you accumulate would be INR 1.86 crores. This means that you would have earned an additional INR 59 lakhs by increasing your monthly SIP payment by 10% annually. It is highly recommended to consider using a step-up SIP calculator as it can impact the accumulation of your corpus.

How a Step-Up SIP Calculator Works

Step-Up SIP Calculator

Here’s an example of how a step-up SIP calculator works – Let’s assume that an investor wants to invest INR 10,000 per month in a SIP for 20 years. They want to increase their investment amount by 5% each year. Using a step-up SIP calculator, the investor can calculate the returns they can expect at the end of the 20 year period.

The steps involved in using a step-up SIP calculator are as follows:

Step 1: Input the initial SIP investment amount – In this case, it would be INR 10,000.

Step 2: Input the SIP duration – In this case, it would be 20 years.

Step 3: Input the expected rate of return – This is the expected rate of return from the mutual fund investment. Assuming a rate of return of 12% p.a. for 20 years.

Step 4: Input the number of years after which you want to increase the investment amount – In this case, it would be one year.

Step 5: Input the percentage by which you want to increase the investment amount each year – In this case, it would be 5%.

Once all these details are entered, the step-up SIP calculator will show the expected corpus at the end of 20 years. In this case, it would be INR 1.27 crores.

Advantages of a Step-Up SIP Calculator

A step-up SIP calculator has several advantages, including:

  1. Higher Returns – By gradually increasing the SIP investment amount, you can earn higher returns in the long run.
  2. Flexibility – With a step-up SIP calculator, you can choose the percentage by which you want to increase your investment amount each year, giving you more flexibility in managing your finances.
  3. Better Planning – A step-up SIP calculator helps you plan your finances better by showing you the expected corpus at the end of the investment period, giving you a better understanding of how much you need to invest each month.
  4. Wealth Creation – By using a step-up SIP calculator, you can create wealth in the long run, helping you achieve your financial goals faster.

Disclaimer

While a step-up SIP calculator can be a powerful tool in wealth creation, investors must gauge all the pros and cons of trading in the Indian financial market. Risk management in financial market trading is a critical factor that must be taken into account while planning their finances. Hence, investors must always consult a financial advisor before making investment decisions.

Summary

A step-up SIP calculator is a tool designed to help investors increase their SIP amount periodically. By gradually increasing the investment amount annually, investors can earn higher returns in the long run. Multi-cap mutual funds and step-up SIP calculator go hand in hand as investors can earn a higher return on their investment using the calculator. The tool provides investors better planning, flexibility in managing their finances and serves as a wealth creation tool in the long run. Investors are encouraged to always gauge all the pros and cons of trading in the Indian financial market and always consult a financial advisor before making investment decisions.

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About the author

Alena Sham

As a seasoned content writer, Alena Sham has a passion for creating compelling, informative, and engaging content. With 12 years of experience in the industry, Alena has worked with clients from various niches, including technology, finance, health, and lifestyle, among others.