Best SIP Invest: A step-up SIP is beneficial as it combats inflation. Along with this, it adjusts your savings with the increase in income like salary increment.
Best SIP Invest: Every person’s dream is to become a millionaire one day. But saving Rs 1 crore is very difficult. However, it is also quite easy to achieve this mountain-like status with a disciplined financial life.
For this, a monthly investment of only Rs 5,400 is required. Where you can fulfill your dream of becoming a millionaire through Systematic Investment Plan (SIP). If you do not know about this, then let us understand it-
What are SIP and Step-up SIP?
Systematic Investment Plan i.e. SIP allows you to invest a fixed amount at regular intervals. You can choose the SIP time 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. This involves increasing the investment amount as your income increases. This strategy maximizes your returns through the power of compounding.
How to get Rs 1 crore through SIP?
Let us understand the strategy of acquiring Rs 1 crore through SIP with an example. If you start a SIP with Rs 5,400 per month at 12 per cent annual interest rate, you will have Rs 49.6 lakh after 20 years.
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 by increasing 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 you can fulfill your dream of becoming a millionaire in the next 20 years.
Benefits of Step-up SIP
Sharp increase in wealth
The biggest reason for choosing step-up SIP is to grow your wealth faster. If you invest for a long time, mutual funds can give good returns. Investors often use SIP for goals like children’s education, marriage, buying property or retirement.
Fight inflation
A step-up SIP is beneficial as it combats inflation. Along with this, it adjusts your savings with the increase in income like salary increment.
Income increase
Many people get annual salary hike. Therefore, financial advisors recommend increasing your SIP amount every year.
Important points 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 in case of job loss or reduction in income of a family member.
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. With this you can reach your target quickly.
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