A systematic investment plan (SIP) is a disciplined approach to mutual fund investments. It helps you invest a fixed small amount at regular intervals (weekly, monthly or quarterly) based on your financial situation.
As your finances improve over time, you can increase your SIP investments with an automated feature called a step-up SIP. With this feature, you can boost your investment by a specific amount, ₹1,000 in 2022, ₹1,000+10% in 2023 and so on.
You can keep increasing your investment as per your age, current income, projected salary hikes and financial goals. Before that, you can use a step-up SIP calculator to forecast the growth of your investments.
What is an SIP Calculator with Step Up?
A step-up SIP calculator shows the future value of your investments as they increase periodically by a specific percentage. The tool is available online on the fund house's website and app.
To use the calculator, enter these variables:
- The amount of periodic investment
- Investment duration or tenure
- The expected returns from your investments
Your expected returns must be realistic to help you invest rationally. After entering these values, the calculator will automatically display the total investment over the tenure and the maturity value.
Why Should You Step Up Your SIP Investments?
A systematic investment plan already allows your deposits to compound to support wealth accumulation. On top of that, if you step up your SIP investments regularly, you can gain an even larger amount of wealth over time. This can be helpful if you're saving for goals like your child's education, marriage and your retirement.
Advantages of Using a Step-Up Calculator
- The tool shows how far you are from your aimed wealth creation. You can check the expected returns, i.e., a rough estimate of the wealth that would be accumulated at the end of the investment tenure. This can encourage you to stay focused on your investments.
- The calculator can also help plan your investments. You can increase the invested amount if your current investment is too low to help meet your financial goal. If the amount grows much higher than expected, you can always redirect a part of it to another financial target.
- The tool helps you pick the funds most suited to your goals. If your investments fall short of your target, you can switch to higher-risk funds. They have higher chances to generate more returns. You can invest in them as per your risk appetite. If the wealth estimate significantly surpasses your needs, you can move to lower-risk funds to preserve wealth.
An SIP calculator with an annual increment works digitally and provides auto-generated results. So, the tool is quick and easy to use. Plus the results are free from human errors. Just visit the fund house's app or website to use the calculator.