What is Step-Up SIP?
1min 41 seconds read
How much you can invest often depends on your income, where you are in your personal life, and how your monthly expenses change. To keep up with inflation and reach your goals on time, it’s important that your investments grow as well.
A Systematic Investment Plan (SIP) is a great way to invest in mutual funds. With the help of SIPs, you can regularly invest a small amount that suits your budget, whether it’s weekly, monthly, or quarterly. To make your investment even more effective, you can use an automated feature that increases your contributions at set intervals.
You can do this by using Step-Up SIP.
Step-Up Systematic Investment Plan (SIP): A Step-Up SIP automatically increases the amount you invest in your mutual fund by a set percentage. Begin a Step-up SIP early in your career for a long-term investment horizon.
Example of Step-Up SIP: Now imagine you start SIP with an initial amount of ₹20,000. Every year, you plan to increase the amount of SIP by 10%. The following is how the Step-up would work:
Year 1: You start with ₹20,000.
Year 2: You increase the SIP by 10%, so you add ₹2,000 to make it ₹22,000.
Year 3: Continuing the increase of 10%, you add ₹2,200 to make it ₹24,200.
So, your SIP amounts would be ₹20,000 in the first year, ₹22,000 in the second, and ₹24,200 in the third.
Now you might be thinking. Why should you Step-up your SIP?
By stepping up your SIP, you can:
> Invest more as your income grows.
> Protect your savings from inflation and rising costs.
> Grow your wealth faster with additional contributions.
> Adjust your investments to meet changing financial goals.
> Develop disciplined saving habits with regular contributions.
> Easily manage and adjust your investments as needed.
Here’s how to start a Step-Up SIP:
Step 1: Decide your initial monthly investment and yearly increase.
Step 2: Set up your Step-Up SIP with your chosen Mutual Fund
Step 4: Make regular contributions as planned.
Step 5: Review and adjust your SIP regularly to stay on track with your goals.
Hence, a Step-Up SIP is great for increasing incomes. With this you increase your investments gradually to become a strong financial asset, like a tree that grows stronger over some time.
Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.