Best SIP Invest: A step-up SIP is beneficial because it combats inflation. It also adjusts your savings as your income increases, just like a salary increment.
Best SIP Invest: It is every person’s dream to become a millionaire one day. But saving Rs 1 crore is extremely difficult. However, achieving this mountainous milestone is also quite easy with a disciplined financial life.
For this, you need to invest only Rs 5,400 per month. Where through Systematic Investment Plan (SIP), you can fulfill your dream of becoming a millionaire. If you do not know about this, then let’s understand it –
What are SIP and Step-up SIP?
Systematic Investment Plan (SIP) allows you to invest a fixed amount at regular intervals. You can choose the time of SIP as per your convenience, daily, weekly or monthly.
Standard SIP is very beneficial for investors. On the other hand, Step-up SIP increases your investment amount. It involves increasing the investment amount as your income increases. This strategy maximizes your returns through the power of compounding.
How to earn Rs 1 crore through SIP?
Let us understand the strategy of earning Rs 1 crore through SIP with an example. If you start a SIP with Rs 5,400 per month at an annual interest rate of 12 percent, then after 20 years you will have Rs 49.6 lakh.
In this SIP, if you increase your investment by 5 percent every year, then you will invest Rs 5,670 per month in the second year and Rs 5,953.5 per month in the third year. This means that after 20 years, this 5 percent annual growth will increase your investment to Rs 68.87 lakh.
Similarly, if you increase your SIP by 8 percent every year, then after 20 years you will have Rs 85.92 lakh. Whereas if you increase SIP by 10 percent annually, you will get Rs 1.06 crore after 20 years.
It is clear from this example that if you increase your investment of Rs 5,400 per month by 10 percent every year, then in the next 20 years you can fulfill your dream of becoming a millionaire.
Benefits of Step-Up SIP
Rapid growth of wealth
The biggest reason to choose a step-up SIP is to grow your wealth rapidly. If you invest for a long time, mutual funds can give good returns. Investors often use SIPs for goals like children’s education, marriage, buying property or retirement.
Combat inflation
A step-up SIP is beneficial because it combats inflation. It also adjusts your savings with the increase in income, just like a salary increment.
Income growth
Many people get an annual salary hike. Therefore, financial advisors recommend increasing your SIP amount every year.
Important things for step-up SIP
Income stability
The idea behind step-up SIP is that your income will increase every year. If you choose a percentage-based step-up SIP, you will need to adjust the cash flow. However, it may be difficult to increase the SIP amount annually if you lose a job or a family member’s income decreases.
Long-term commitment
If you stop increasing your SIP investment every year, it will affect your total returns. However, if you continue to increase it, you will get good benefits in the long run. If your income increases more than expected, you can increase your SIP to a larger amount. This will help you reach your target quickly.
