Step-Up SIP: How To Make Rs 1 Crore In 10 Years?
Many mutual fund houses offer a special feature called ‘step-up SIP’ to accelerate your long-term wealth creation.
Building a corpus of Rs 1 crore is a remarkable financial milestone. For many people, it’s a dream to become a crorepati. Though it may sound unrealistic, accumulating Rs 1 crore over the long term is not a difficult task. Financial discipline, consistency and a long-term investment horizon can help you to achieve your goal easily.
In the last few years, the mutual fund Systematic Investment Plans (SIPs) have emerged as the most preferred investment tools for long-term wealth accumulation. If you are looking to build a corpus of Rs 1 crore in 10 years, SIPs allow you to achieve the target by investing small amounts regularly. However, a step-up SIP can accelerate your investment journey and help you to achieve the Rs 1 crore target in a shorter tenure.
What Is Step-Up SIP?
Many mutual fund houses offer a special feature called ‘step-up SIP’ to accelerate your wealth creation. While through SIP you can keep on investing a fixed amount in a mutual fund scheme, step-up SIPs allow you to increase your investments at a certain percentage periodically.
Generally, step-up SIPs allow investors to increase their investments in an existing scheme by a fixed amount every year. So, through the step-up strategy, you can achieve your financial goal over a shorter tenure and even with an investment of a lower amount.
Rs 1 Crore In 10 Years: SIP vs Step-up SIP
Let’s take a look at how step-up SIP works and how you can use this investment tool for accumulating Rs 1 crore in 10 years.
An analysis of investments in an SIP and a step-up SIP could help choose the most suitable option. You can use any online SIP calculator to find out the required monthly investment and the estimated returns.
Building Rs 1 crore through Step-up SIP
In order to accumulate Rs 1 crore, you may need to invest Rs 30,000 every month for 10 years in a step-up SIP at an assumed interest rate of 12% per annum. Under the step-up feature, investments need to be increased by 10% every year.
Here’s how your investment could grow:
Total Value: Rs 1,01,23,001
Invested Amount: Rs 57,37,488
Estimated Returns: 43,85,513
Tenure: 10 years
Step-up: 10% per annum
Interest Rate: 12% per annum
Monthly Investment: Rs 30,000
Let’s see how your SIP investments will grow in the same scenario without the step-up feature.
Building Rs 1 crore through SIP: A monthly investment of Rs 30,000 in SIP without a step-up feature could grow to nearly Rs 70 lakh in 10 years at an estimated return of 12% per annum.
Total Value: Rs 69,70,172
Invested Amount: Rs 36,00,000
Estimated Returns: Rs 33,70,172
Tenure: 10 years
Interest Rate: 12% per annum
Monthly Investment: Rs 30,000
In order to achieve the target of Rs 1 crore with the same investment, you may need to increase the tenure to more than 12 years.
The monthly SIP of Rs 30,000 is likely to grow to Rs 96,67,565 over 12 years at the same interest rate. Similarly, you may need to increase your monthly amount to Rs 45,000 to reach a corpus of Rs 1 crore in 10 years.
