Take the initiative SIP against SIP You must have seen the Step-up option if you have ever made a SIP investment in a mutual fund.
Understanding Sip Investment Options
Upon seeing this option, you have Possibly always wondered why Step-up is available. In addition, which one is advantageous and which will provide higher returns?
The most straightforward way to invest in mutual funds is via SIP. Still, SIP provides a multiple range of opportunities. Among these alternatives is step-up SIP. When individuals see the Step-up option, they often get perplexed.
For example, what is it, what are the benefits, and is it beneficial to them?
Also Read: Shubhanshu Shukla Says ISS Experience Key to Gaganyaan Mission
Step-up SIP: What is it?
Take the initiative. With SIP, you raise your investment at predetermined intervals by a certain amount. This time frame might be a year, a month, or any length of time. Alternatively, the amount you decide to increase depends entirely on you.
For example
Let us say an investor chooses to use the Step-up option to raise his investment amount by 10% annually. Accordingly, if the initial investment is Rs 1 lakh, the second year’s investment will be Rs 1,10,000.
SIP: Fixed monthly investment.
Step-up SIP: Investment amount increases over time.
Advantage: Builds bigger wealth than normal SIP.
Income Match: Keeps pace with rising income.
Inflation Shield: Helps beat inflation.
Goal Focused: Best for long-term financial goals.
Step-up vs SIP Returns
Step-up enables you to gradually increasing the amount of your investment.
Larger investment – greater profit share
According to Shaily Gang, Head of Product at Tata Assets Management, let us say an investor makes a Rs 10,000 monthly SIP for 20 years. Another investor, however, makes a SIP of Rs 10,000 per month for 20 years, with an annual step-up of 10%. Since the step-up investment is larger, the investor will profit more even if the typical return is 10%.