What are Step-Up Systematic Investment Plans? Are they better than regular SIPs?

Mumbai (Maharashtra) [India], September 12: Over time, a Step-Up SIP is progressively raising mutual fund investments. Unlike traditional SIPs with set periodic payments, Step-Up SIPs let investors progressively raise their contributions, adjusting to changing income and changing financial goals. To help them reach their targets and determine suitable annual increases, investors project future investment values using an online Step Up SIP calculator, evaluating the effect of increasing SIP amounts.

Understanding Step Up SIP Calculator

Step-Up SIP calculators are tools meant to enable investors to project the future value of their systematic investment plan (SIP). It helps investors decide on the ideal annual increment to suit their SIP preference and financial goals.

Using the Step Up SIP Calculator, a projection of how your investments would grow over time, you can plan and see with these little contributions. In this sense, subject to market risks, you can choose your investments with knowledge and ensure you reach your financial goals.

How to use the Step-Up SIP Calculator?

Easy online tool accessible even for beginners, the Step Up SIP calculator. You have to enter the following data to make use of it: Initial monthly SIP investment amount; SIP length expressed in years; expected rate of return on the investment, and monthly SIP annual % increase value.

Once these data are entered, the calculator creates the projected future value of your SIP investment, which helps support financial planning and goal setting.

What all to keep in mind when investing in mutual fund SIPs?

SIPs help to develop the discipline of consistent, controlled investing.

By routinely investing a set amount at a set date and frequency—weekly, monthly, quarterly, etc.—regardless of the current NAV or market level, SIPs help in disciplined investments. You need not focus on timing the stock market for regular and step up SIPs. Just stay disciplined and keep investing at whatever frequency you have set the SIPs to.

SIPs increase the long-term magical power of compounding.

Unlike its rivals like PPF, NSC, or tax saver FDs, past years have clearly shown that equities have regularly given inflation- beating returns. Particularly to build a sizable corpus for financial goals like down payment on your dream house, child’s higher education corpus, or your retirement corpus, a long term investment is required to enjoy compounding. Compounding not only lets you earn interest but also re-invested earnings—interest or dividend plus principle. This suggests that your principal earns as well as your returns. The power of compounding would be more the longer you remain involved.

SIPs give investing liquidity and adaptability.

SIP frequency and dates can be set by investors according to financial situation and convenience.

The amount would be auto debited on the designated date. Once you have chosen the particular financial goals and desired corpus amount, you must choose the debit frequency of your SIP (such as monthly, quarterly or annually) depending on your financial situation, current income, and regular expenses. Should an investor wish to redeem or exit the money or should they find themselves unable to service the SIPs for a designated period, they can stop their SIP. Anyone can re-start a fresh SIP whenever they so want.

Most fund houses also let you choose the top-up/step-up amount/percentage right at the start of the SIP, so guide your SIP amount going forward. Only some fund houses, meanwhile, provide the ability to set up an ongoing SIP, whereby you can periodically raise an existing SIP by a specified percentage—say, 5% annual increase. Still, you can align your financial goals with your present income as well as with expected yearly increases. Step up facility helps the investor to reach the specified investing amount over a period of time, or in case the target corpus “increases due to any reason or unexpected emergency.”

Choose direct plans over regular ones for SIPs

Unlike regular plans whereby intermediaries and fees connected with them are involved, direct plans let the investor buy mutual funds straight from the fund houses. Higher returns, better NAVs and almost 1-1.5% lower expense ratio direct plans offer than standard plans. Investors wishing to invest in SIPs can visit online financial markets providing direct plans, which would better illustrate their advantage. By offering automated advisory services to help every client choose the correct plans and create a portfolio, such portals also help new investors to invest in direct plans. Furthermore, these kinds of services are available completely free of charge on certain internet sites.

Periodically review your SIP’s performance

Your work is not finished yet even after you have selected the appropriate money to create a portfolio and started investing in step up SIPs. Review the portfolio on occasion to monitor the performance of the selected funds. You should exit such funds if your current funds have been underperforming regularly since a few quarters (at least three-four quarters), have changed their fund managers or management style. Check the performance of your fund against other peer funds in its category and benchmark indices. By doing this, you will be able to properly assess the performance of your present funds and exit them timely to prevent any damage or impediment on the way your corpus is created.

FAQs on step up SIPs

Q1. Does Step-Up SIP outperform regular SIP?

Step-up SIPs allow a flexible approach for progressively higher mutual fund contributions. Unlike conventional SIPs, Step-Up SIPs let the investor be flexible in progressively raising investment amounts, fit changing financial situations and goals, and the investment suitability depends on the investor.

Q2. For which application does Step-Up SIP fit?

Those who wish to create long-term wealth would be fit for step-up SIPs since they allow investors to progressively raise their investment level over time.

Q3. With what accuracy does the Step Up SIP Calculator produce results?

The Step-Up SIP Calculator offers calculations, but it’s crucial to realise that since mutual funds, influenced by market risk, are naturally erratic and cannot guarantee the precise returns of investments.

Q4. Can the Step-Up increment be changed at another point?

Investing sites indeed allow you to vary the Step-Up percentage based on your financial situation.

Q5. Do NPS investors also get an online calculator tool like step up SIP?

Yes. Just like online SIP calculator tool NPS investors can use the online nps return calculator tool to estimate their expected corpus after a certain tenure, as per the expected returns and invested amount.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in stocks involves risk, and past performance is not indicative of future results. Readers should conduct their own research or consult with a qualified financial advisor before making any investment decisions.