A convenient way to invest in mutual fund schemes is systematic investment plans (SIPs). These plans allow you to invest in mutual funds monthly, unlike the lump sum investment mode, where you invest at once. However, people commit one mistake while investing through SIP. The mistake is keeping the investment amount the same throughout the investment journey. You can commence your investment journey with a small amount; however, you can gradually increase the SIP amount with every salary hike. This facility is called the step-up SIP facility.
What is step-up SIP?
While running, you will gradually increase your speed. The same theory applies to SIP mutual fund investments. You can start your SIP investment with a small amount and raise it over time with appraisals. Called step-up SIP, it is a facility that almost every AMC offers. An online increasing SIP calculator can help you identify the step-up amount.
How to use the step-up facility?
Here are the steps involved in using the step-up SIP feature:
- Choosing mutual fund:
This step is similar to regular SIP. Choose a mutual fund type that aligns with your risk profile and financial goals. For instance, invest in equity funds if you have a high-risk tolerance. Conversely, consider investing in debt mutual funds if your risk appetite is low.
- Choose step-up SIP:
Next, opt for the Step-up SIP option. After choosing this option, enter details like the initial investment amount, the percentage by which you would like to increase your investment amount annually, step-up frequency and the final fund allocation amount in respective columns. Most AMCs allow you to increase the investment amount annually or every six months. A sip calculator with step-up options can help you in this step.
- Specify the maximum amount:
You can also specify the amount you wish to invest per month. This way, your SIP investment will increase until it hits the ceiling. After that, it will become a regular SIP, and the same investment amount will continue.
- Specify the duration:
Select the step-up option while you are starting your SIP investment journey. Choosing a step-up option mid-way through your SIP might not be possible. If you want to cancel the step-SIP, the same applies to the regular SIP, and you can start a new regular one. During financial crunches, you can pause the SIP for approximately three months.
A SIP step-up calculator can help you throughout the entire process of setting up the step-up SIP facility.
Why use a step-up SIP calculator?
Some of the advantages of using a step-up SIP calculator are:
- They help you formulate your investment strategy before you begin your investment journey. They assist you in creating a monthly budget.
- They are easy to use. You just need to enter details like how much you can afford, investment duration, expected returns, and how much you can annually increase your investments, and you will get your answers in a few minutes.
- A SIP calculator step-up is free and accessible. There are no timing or location restrictions for using them.
Conclusion:
Step-up calculators compute the future worth of your SIP investments if you increase your fund allocation. The step-up calculator is a tool that helps you estimate the growth of your corpus. Use these calculators to calculate returns to raise your investment annually.