How does the Step-up SIP calculator work? All you need to know
In the previous article, we learned how to use a SIP calculator to estimate your expected return over a given period with a fixed amount of monthly investment and an expected rate of return. In this article, we will discuss the Step-up SIP calculator.
SIP (Systematic Investment Plan) is a method of investing that requires consistency in investments, even if the amount is small. It focuses on time and needs the compounding cycle not to break.
What is a Growing SIP Calculator (Step-up SIP calculator)?
The SIP investment format has great potential to build wealth for you. However, if you step up your fixed periodical investment amount by some percentage every year, you will generate more returns and have a massive corpus.
Stepping up your SIP is beneficial if you have constant income growth. For example, if you are currently investing Rs 10,000 a month in your SIP, then after one year, you increase your monthly investment amount by 15% and keep on doing this in successive years.
This method of increasing your monthly investment is called stepping up your SIP.
How does a Growing SIP Calculator (Step-up SIP calculator) help?
A Step-up SIP calculator will give you the future value of your SIP investments which you keep on increasing periodically by a given percentage.
This calculator is different from the average SIP calculator in one sense it requires the step-up percentage as an input as well.
To calculate your returns, you have to input the values of your monthly investment amount, the growth percentage of your SIP investment, the expected rate of return, and the tenure of investment.
The step-up calculator is helpful to you as an investor in the following ways
- Get results about complex investment scenarios with a single click
- Obtain the estimated potential returns
- Compare various SIP options by varying the inputs in the formula
- Assists you in making well-informed and calculative decisions regarding your investments
- Free-of-cost calculation
- Easy to use
Benefits of SIP
1. Financial discipline
When you opt for a SIP, you indirectly get into the habit of keeping aside an amount of money from your income for investment.
The fact that there will be a monthly deduction towards a scheme will ensure you keep track of your income and expense on a periodical basis to ensure the investment is not hindered.
You also will be planning your expenses after you would have invested an amount at the beginning of the month.
2. Fund managers
Mutual fund investments are supervised by professional fund managers who have proven experience in managing portfolios.
They observe market trends and make wise decisions in order to grow your money and minimize major losses. This will be a great advantage for someone who is not well-versed in investment and struggles with financial jargon.
When you choose SIPs, you invest money periodically and have a professional fund manager overseeing your investments.
3. The fruits of compounding
The returns on your investment benefit from compounding. Compounding means you don’t just get the return on what you spend out of your pocket but also what you earn from it.
This basically leads to your corpus getting richer with time. You can enjoy the power of compounding when you choose a SIP and stay dedicated to the investment for a long time.
4. Rupee cost averaging
This is one of the major benefits of compounding. When you invest an amount through SIP, you do not need to worry about timing the market.
You buy a high number of units when the NAV is low due to the markets, and on the other hand, you buy a lesser number of units when the NAV is high.
This factor of SIP ensures the overall cost of purchasing mutual fund units averages out over the tenure of investment.
Important points to note about the Step-up SIP calculator
Systematic Investment Plans come with semi-annual and annual stepping-up options. As an investor, you cannot increase the size of an existing SIP; the option becomes active only if you select the option concerned while setting up the SIP.
If the step-up option is not selected, you will need to start a new SIP by selecting the step-up option.
A valid reason to step up your SIP is the logic of raising your savings with your rising income. You can directly transfer your increased savings into your existing SIP if you have a step-up SIP instead of creating a new one.
You can automate your SIP settings to raise the investment amount to the necessary level without worrying. For example, if you are sure of getting an income raise of 10%, you can enter the step-up percentage at 7-8%. The longer you invest, the longer you allow the magic of compounding to work.
How is Step Up SIP calculated?
The Step-up SIP calculator helps you calculate your returns. For example, if you invest Rs.5000 through SIP monthly and decide to step up your SIP amount by 10% every year, your investment amount will increase to Rs.5500 for the next investment tenure.
Why is Step Up SIP better?
Step Up SIP is one of the best options for people who lack financial discipline. They, most often than not, fail to increase their SIP amount when their income increases. A step-up SIP will automatically raise their investment amount by a predetermined percentage every year.
Which SIP is best for 1000 per month?
Franklin India Feeder Franklin U S Opportunities Fund for SIP
Canara Robeco Bluechip Equity Fund for SIP.
Canara Robeco Emerging Equities Fund for SIP.
Nippon India Value Fund for SIP.
Nippon India Arbitrage Fund for SIP.
Which SIP is best for 10 years?
Franklin India Technology Fund
ICICI Prudential Technology Fund
PGIM India Global Agribusiness Offshore Fund
Aditya Birla Sun Life Digital India Fund
SBI Technology Opportunities Fund