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If you invest Rs 10,000 every month in an equity mutual fund, assuming 10% CAGR, it will take you more than 20 years to accumulate Rs 1 crore
Becoming a crorepati is not an overnight journey. If planned well, a disciplined investor could well become a crorepati slowly and steadily. Savings alone are not enough. You need regular investment for wealth creation. If you are already doing systematic investment plan (SIP) in mutual fund schemes, add another aspect to it to become a crorepati sooner. All you need is increasing your investment amount by a couple of thousands every year to reach your financial goal sooner than later.
If you know about SIPs, now get familiar with step-up SIP.
“Step-up SIP is a wonderful option for every investor who wants to start small and gradually increase systematic savings over a period of time. Specifically for salaried individuals, this can get aligned to the increase in income and therefore investible surplus over years,” said Ankur Maheshwari, CEO, Equirus Wealth.
In a given year you may not be in a situation to shell out the required amount of investment. What you can rather do is increasing your investment amount by every passing year.
Breaking it down
If you invest Rs 10,000 every month in an equity mutual fund, assuming 10% compounded annual growth rate (CAGR), it will take you more than 20 years to accumulate Rs 1 crore. However, if you increase your investment amount by Rs 3,000 each year, you can easily amass Rs 1 crore in 15 years. So, in step-up SIP if the base SIP amount is Rs 10,000, then you do it for 12 months and from 13th month onwards you’ll start investing Rs 13,000 for next 12 months. The third year will have 12 instalments of Rs 16,000, followed by 19,000 and so on for following year up to total 15 years. As you do it, you can become a crorepati in 15 years collecting Rs 1.03 crore.
If the mutual fund scheme delivers more than 12% returns, you will reach your goal of Rs 1 crore even faster.
What is the benefit of step-up SIP?
While one can increase the SIP amount every year manually, but most of us delay or simply forget about it or other pressings take precedence. If you opt for a step-up SIP today, the increase in SIP amount will happen automatically each year. It makes you a disciplined investor.
“The biggest benefit is the automated disciplined approach of wealth creation in the long-term. It ensures that in a systematic way the savings are channelised timely without manual intervention,” said Maheshwari.