Systematic Investment Plan or SIP is the magic wand that the middle class of India has discovered in recent years. The SIP numbers each month will provide a glimpse of the enthusiasm of the investor community with SIP.
In August 2024, according to AMFI (Association of Mutual Funds in India) data, a total amount of Rs 23,547 crore has flowed into the mutual fund industry through the SIP route. More important, since June 2023, SIP inflows have touched a new record every month. Investments have flowed in through 9.61 crore SIP accounts.
There are two modes of SIP – a normal mode where the amount remains the same every month, and a step-up mode where the amount is raised every year either by a fixed amount or a fixed percentage of the investment every month in the previous year. The two modes can actually make a big difference in the returns they generate. Let’s turn to the SIP calculator to find out.
Mutual Fund SIP calculator
Let a person open an SIP account at the age of 30 and start investing Rs 25,000 every month. Let the returns be at a rate of 12% a year. If he/she does not raise the investment amount, the total nominal investment that this person makes in 15 years will be Rs 45 lakh.
The total gains that the investor will make in 15 years will be Rs 81.14 lakh, delivering a total value of Rs 1.26 crore at the end of the 15th year.
Mutual Fund Step-up SIP
Now consider another investor start with the same investment of Rs 25,000 in the first year. Let him/her raise the amount invested by 5% every year. It means he/she will invest Rs 25,000 + 5% of Rs 25,000 = Rs 26,250 every month in the second year. The investment will rise every year by 5%, which is not a big amount, since it is expected that the income of the person will also rise with time.
In this way, the person will generate a total value of Rs 1.63 crore at the end of the 15th year. He/she will make a nominal investment of Rs 64.73 lakh that will generate a total gain of Rs 98.53 lakh. Therefore, the step-up SIP will pay him/her a value that is nearly 30% more than the normal SIP.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
SIP is the instrument that has taken India’s middle class by storm since it allows the golden combination of inflation-beating returns with convenient, regular investments. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
