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 Step-up SIP calculator?
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 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
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.