Step-Up SIP
A SIP where the instalment increases by a fixed percentage or amount every year.
Stepping up an instalment in line with salary growth raises the invested corpus substantially without changing your savings rate, because later contributions are larger while earlier ones keep compounding.
Why Step-Up SIP matters when comparing products
Understanding Step-Up SIPs is important when evaluating investment options, especially for long-term goals. It allows investors to factor in potential income growth, demonstrating how a systematic increase in contributions can significantly enhance the final corpus compared to a static SIP. This feature can differentiate products by their flexibility and potential for accelerated wealth creation, aligning investments with an individual's evolving financial capacity over time.
Illustrative example
Consider an individual starting a SIP of ₹5,000 per month. If they increase their SIP by ₹500 every year, their second year's contribution would be ₹5,500 monthly, and the third year's ₹6,000. This gradual increase, even with modest amounts like ₹500 annually, can lead to a substantially larger investment over 10-15 years compared to maintaining the initial ₹5,000 SIP throughout the period.