Step Up SIP Calculator - Top Up Your Investments
A step up Systematic Investment Plan (SIP) calculator helps you calculate the corpus you will accumulate by increasing the SIP amount periodically (usually annually). The step up SIP calculator helps make informed investment decisions regarding the increased SIP contributions to achieve your financial goals.
What is the Step Up SIP calculator?
SIP is a popular mode of investing where you invest a fixed sum of money periodically, typically monthly. Step up SIP is the type of SIP where you instruct to increase the SIP amount (by percentage or amount) periodically.
Let’s take an example to simplify the concept of step up SIP. Say you want to invest ₹1 lakh via SIP and instruct it to increase by 10% every year. The SIP contribution would be ₹1 lakh for 1st year, ₹1.1 lakh in second year, ₹1.2 lakh in third year, and so on.
So, to calculate what corpus you can accumulate over the period using step up SIP, you can use the step up SIP calculator.
How Does a Step Up SIP Calculator Work?
To calculate the maturity value using the step up SIP calculator, certain inputs are required. These inputs are:
- Initial Monthly SIP Investment
- Annual Increase (%)
- Expected Rate of Return (p.a.)
- Investment Duration (years)
You can try different combinations to understand what best suits your financial goals.
What Is the step up SIP Calculator Formula?
To arrive at the future value using the step up SIP calculator formula, you need to input four parameters. Here is the formula to calculate maturity value using step up SIP calculator:
Future Value (FV) = P * [(1 + r/n)^(nt) – 1 / (r/n)] + (S * [(1 + r/n)^(nt) – 1 / (r/n)])
Where,
- P = Initial SIP amount
- r/n = Rate of return
- nt = Compounding frequency
- S = Annual increase amount for the monthly SIP
How To Use the Online Step Up SIP Calculator?
Although the above formula can give you the maturity value, it is very complex and time-consuming to manually calculate the returns on a step up SIP. Hence, it is prudent to use the online step up SIP calculator. The online step up SIP calculator tool is very easy setting you free from complex calculations.
How to Use Purnartha Step Up SIP Calculator?
Purnartha has made it easy for you to calculate the returns of step up SIP using the step up SIP calculator. You just need to follow the instructions as below:
- Enter the Monthly SIP Investment amount
- Enter the Annual Increase (%), where you need to enter by what percentage you want your SIP to increase.
- Enter the Expected Rate of Return (p.a.).
- FInally, enter your desired Investment Duration (years).
Once you have provided your inputs, you will instantly see the results. You will see total invested amount for the period, estimated returns, and total maturity value.
Let’s understand this with an example. Say you invest ₹1 lakh in a step up SIP with an annual increase in SIP of 10% for investment duration of 10 years, and the expected rate of return is 15%.
On maturity, you will have a corpus of ₹3,95,74,193, while your total amount invested for the period will be ₹1,91,24,910. This means your estimated returns for the period will be ₹2,04,49,283.
However, it is important to note that, market conditions do have an impact on the step up SIP returns. As the markets are volatile in nature, the step up SIP returns may increase or decrease, affecting the maturity value.
Advantages of Using a Step Up SIP Calculator
The following are the basic advantages of using the step up SIP calculator:
- Once you avail the step up SIP, you cannot modify the same. In that case, the step up SIP calculator helps you provide an estimate before you actually invest.
- The online step up sip calculator is easy to use as you only need to enter four basic parameters to get the result.
- Another benefit of step up SIP calculator is that, it is free to use and is easily accessible any time anywhere.
- The step up SIP calculator is a Do it Yourself (DIY) tool, so don’t need any expert assistance to calculate the results.
What is SIP?
SIP or Systematic Investment Plan is one of the methods of investing in stocks, mutual funds, and portfolio management schemes. SIP helps you to invest a fixed sum of money at regular intervals. Investing monthly via SIP is the most preferred option by investors, but there are avenues where you can also invest annually, semi-annually, quarterly, fortnightly, weekly, and daily.
SIP plan is one of the easier and more convenient ways of investing. Investing in SIP has the benefit of rupee-cost averaging over the long term. In fact, SIPs are also flexible enough to allow you to eventually increase your contribution. You can take the help of the online SIP calculator to calculate the potential SIP returns of your investment.
Types of SIPs
There are various kinds of SIPs which you can use to invest as per your requirements:
- Regular SIP:This type of SIP helps investors invest a fixed sum periodically, usually monthly.
- Flexible SIP:This type of SIP, also known as flexi or flex SIP, allows you to change the SIP amount as per your need. Say, during market fall increase the SIP and vice versa.
- Step-up SIP:This type of SIP, also known as Top-up SIP, allows you to automatically increase the SIP contributions at regular intervals. You can check out our step-up SIP calculator.
- Perpetual SIP:If you opt for this type of SIP, your periodical SIP will continue until you cancel. Such SIPs only have the SIP start date.
- Trigger SIP:Investing via trigger SIP can help you change the SIP amounts depending on the trigger event. The trigger could be anything from a specific index or NAV (Net Asset Value) level, an index hitting a 52-week high, etc.
- Multi SIP:This type of SIP allows you to invest in multiple funds of the same fund house with a single SIP.
Benefits of SIPs
- Investing via SIP helps compound your money over the years.
- Investing in SIP sets you free from timing the market.
- You are likely to achieve greater corpus without investing in one go.
- SIPs help inculcate financial discipline as they help you steer away from emotional financial decisions.
SIP Vs Lumpsum
Investing via SIP and lumpsum are the two modes in which you can invest in avenues. Both have their advantages and disadvantages. SIP plan sets you free from timing the market, while lumpsum investments are beneficial if you know how to time the market.
Tax Implications on SIP Investment
The SIPs are taxed based on their holding period. According to the Income Tax Act, there are two types of capital gains - long-term and short-term capital gains. And this is different for equity and debt investments.
For equity: Any gain from equity investments held for more than 12 months is considered long-term capital gains and is taxed at the rate of 12.5% on gains above ₹1.25 lakhs. If you sell your equity investments before 12 months, then it is categorised as short-term capital gains and will be taxed at the rate of 20%.
For debt: Any gain from debt investments held for more than 24 months is considered long-term capital gains. If you sell your debt investments before 24 months, then it is considered as short-term capital gains. Both long and short-term capital gains are taxed as per the individual tax slabs.
Avoid These Mistakes in a Systematic Investment Plan
Here are some of the pitfalls that you should avoid while investing via SIP:
- Procrastination: Starting early always reaps the benefits, so try to avoid delay in starting with your SIP.
- Discontinue SIP: The benefit of SIP can be experienced when you remain invested for the long term. So, it is always prudent to avoid stopping your SIP midway, unless emergency.
Step Up SIP Calculator Frequently Asked Questions (FAQs)
Can we step up existing SIP?
Yes, you can step up your existing SIP. To do so you need to get in touch with your investment provider. Usually, they have an option to convert your normal SIP into a step up SIP.
Is step up SIP good?
Step up SIP is mostly suitable for long-term financial goals. With step up SIP you gradually increase the SIP amount to achieve your financial goals.
What is 5% step up SIP?
A 5% step up SIP means that your monthly SIP contribution will increase by 5% every year. Say your monthly SIP amount is ₹1 lakh. So, a 5% step up SIP means for the first year your SIP will be ₹1 lakh, in the second year it will be ₹1.05 lakh, in the third year it will be ₹1.1 lakh, in fourth year it will be 1.16 lakh, in the fifth year it will be ₹1.22 lakh, and so on.
Can I stop step up in SIP?
Yes, like any regular SIP, you can stop step up SIP as well. However, you cannot modify the step up SIP. To modify the step up SIP, you need to stop the existing step up SIP and start a new one.