An SIP (systematic investment plan) is a safe, affordable, and popular mutual fund investment mode. In the case, you already invest in SIP to accumulate an adequate corpus for your goal over time, you may be aware of the term mutual fund step-up SIP. This is a kind of SIP where you can increase your contribution towards SIP periodically.
What’s a step-up SIP?
An SIP is a mode through which you can automatically invest in a preferred mutual fund a specified amount on a periodic basis. Step-up SIP mode, also addressed as top-up SIP allows you to enhance your monthly contribution periodically. Hence, with SIP step up route, you can enhance your contribution as your income rises over time.
What are the methods used by a step-up SIP?
Mentioned here are two methods of a step-up SIP mode and how they function –
- Amount basis
Here, you are allowed to enhance your SIP contribution by adding a fixed constituent to your SIP investment mode on an annual basis. For instance, suppose you begin your mutual fund SIP at 4,000 per year and you decide to increase your contribution by Rs 1,000 per year. So, in the upcoming year, your SIP amount would be Rs 5,000, and then Rs 6,000 in the next year and so on.
To compute your overall expected returns on your step-up SIP, you can use an online step-up SIP calculator. Using the online SIP calculator with the step-up option, you get an idea of whether you need to increase your contribution more in the upcoming years to reach your financial goal by the deadline.
- Percentage basis
You can enhance your investment contribution by a predetermined percentage annually. Let’s go through this example to understand it better.
Suppose you began your SIP mutual fund of Rs 3,000 and want to enhance your contribution by 10 per cent annually. So, in the next year, your investment amount would be Rs 3,300 and for the third year, the SIP contribution would be Rs 3,630 and so on. You can use an online increasing SIP calculator to compute the annual increase in contribution and the overall returns earned by the predetermined time period.
How online SIP step-up calculator work?
Investment computations are a time-consuming process. Also, manual computation often leaves a scopefor manual error. The step-up SIP calculator is an online instrument that computes error-free and instant outcomes.
Here is a stepwise approach for using an online SIP step-up calculator –
Step no. 1 – Visit the official site of any mutual fund of your preference.
Step no. 2 – Find out and open the step-up SIP calculator option.
Step no. 3 – Input the monthly contribution you can invest in a preferred mutual fund scheme.
Step no. 4 – Input the expected return rate of the mutual fund scheme.
Step no. 5 – Input the mutual fund tenure.
Step no. 6 – Input the annual step-up percentage or amount.
Step no. 7 – Hit on the compute option for the outcome.
The outcome i.e., the overall corpus value on the fund’s maturity would be displayed instantly. In the case, you are unsatisfied with the outcome, then you can make relevant changes to the inputs to compute the result of your preference.