There is no doubt that Systematic Investment Plan (SIP) is one of the best way to invest our money systematically. It inculcates two very important principles of investing—discipline and long-term approach.
SIP has become the most popular tool for investing in Mutual Funds in the last decade, because it helps us to invest small amounts every month and build substantial wealth over long term. Not only that, it also helps us in achieving various financial goals like Retirement, Child’s Education and Marriage, Buying house, etc.
There is no denying that SIP is a great investment tool and has done well for us. It has helped people build wealth in long term and not many people have complaints with regular SIPs as they have learned that they will be able to reap the fruits if they invest for long term.
Why opt for Step up SIP?
A conventional SIP is good, but it should be increased every year to cope up with the inflation.
Our income increases year after year, so do our expenses; then why we should not increase our investments?
Many of us plan to increase the SIP amount every time we get an increment, but in reality most of us fail to do so.
Also, starting a fresh SIP every year and managing the portfolio consisting of multiple schemes/folios will become a cumbersome job.
This is where Step up SIP comes into picture. Step up facilitates automatic increase in the SIP amount by a fixed amount at a predefined period.
Benefits of investing through step up SIP:
- Step up SIP helps you to easily achieve your log term financial goals in time.
- Entails automatic increase in the amount you save and invest.
- Helps in aligning investments with the increase in inflation.
- No need to plan for fresh SIP investment every year with the rise in your income.
- Flexible, as you can stop the step up SIP at any given point of time.
Looking at the above table, Step up SIP looks impressive and has built more wealth for investor compared to regular SIP.
Let us look at the above example and understand what helped Step up sip in generating more wealth for investor?
- Every year there is an increase in the monthly investment amount of Rs. 500
- Power of Compounding, which helped the money grow faster
So an additional investment of Rs.11.40 Lacs over 20 years will garner an additional gain of Rs.35.60 Lacs for the investor.
Opting for Step-up SIP is now essential for every investor which will help them to achieve various financial goals on time and align their investments to cope up with the inflation.