Step up SIP Benefits: Indian investors keep looking for investment options available in the market to build a good corpus in the long run. If you are planning to get better returns on long term investment, then Systematic Investment Plan (SIP) can be an option for you.
Many investors invest small amounts in SIP for a long period. However, if one thing is kept in mind while investing, your corpus may be larger than expected. Instead of fixed SIP, you can invest under step up SIP. Let us know what effect this change will have on your returns….
What is fixed SIP?
Under fixed SIP, investors invest a fixed amount for a long period of time. There is no change in the amount of investment. For example, if you start a SIP of Rs 5,000 for 15 years, you keep investing Rs 5,000 every month for the entire period.
Step Up SIP
In Step Up SIP, investors increase the investment amount every year according to their income. For example, if your monthly SIP amount is Rs 5,000, and you continue your investment journey by increasing it by 5 percent every year. This is called Step Up SIP.
There may be difference in returns
You may see a difference in the returns of fixed and step up SIP. Let us understand this with an example, if someone invested Rs 10 thousand under fixed SIP for 25 years. If he gets an annual return of 15 percent on this investment, the corpus will be around Rs 2.76 crore.
In the same condition, if you increase your investment amount by 10 percent every year, your corpus will be Rs 5.76 crore. That means, you will get almost double the corpus.
Disclaimer: (The information provided here is being given for information only. It is important to mention here that investment in the market is subject to market risks. Always take expert advice before investing money as an investor. ABPLive.com never advises anyone to invest money here.)
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