A systematic Investment Plan (SIP) is a disciplined method of investing in mutual funds. It allows you to invest a fixed little amount of money at regular intervals (quarterly, monthly or weekly) as per your financial situation.
After a duration when your finances improve, you can increase your SIP donations with an automatic feature. That is step-up or top-up SIP.
Every year, you can raise your SIP investment by a certain amount, ₹1000 in 2021, ₹1000+15% in 2022, and so on. You may accomplish this according to your current income, projected annual hikes and most importantly, your financial goals. Then you can use a step-up SIP calculator online to predict the growth of your investments. Here is everything about the role of this calculator when investing via SIP in mutual funds.
What is Step-Up SIP Calculator?
It shows the future value of your SIP investments which go up periodically by a certain percentage.
You simply need to input specific variables, such as:
- The monthly investment value (the amount you wish to save or are already saving every month)
- The duration/tenure (the number of months for which you want to run your SIP)
- The expected returns from your investment (It’s a good idea to have reasonable expectations to make realistic investments.)
Once you have entered these variables, the step-up SIP calculator will automatically calculate the total investment made during the span and the maturity value.
Why Should You Step Up Your SIP?
SIP already allows your investment to compound to help in wealth creation. When you top up the investments regularly, you can build an even greater amount of wealth over time. As your income grows, you can be better off to step up your SIP periodically to increase your savings. This can be useful even when investing in a retirement mutual fund.
Benefits of Using a Step-Up Calculator
Here are the reasons to keep using the step-up systematic investment plan calculator throughout the SIP tenure to make well-informed investment decisions:
- It shows you how far you are from your target amount. You can learn the amount you can earn and receive a rough estimate of your accumulated wealth. So, you can focus better on your investments.
- The step-up SIP calculator helps plan your investments effectively. You can up the invested amount if your present SIPs are too low to satisfy your financial requirements. In case the amount grows much higher than what’s targeted, you can redirect a portion of it to another financial goal. Thus, you can save in tune with your requirements.
- The calculator helps you choose the funds most suited to your needs. If the SIP amount falls short of the target, you can move to higher-risk funds to generate more returns and wealth when your risk appetite and investment tenure let you do so. In case your wealth estimate considerably exceeds your needs, you can switch to lower-risk funds for wealth preservation.
Make sure to check your KYC status and keep it updated before you use SIP to invest in a mutual fund.