The beauty of SIP (Systematic Investment Plan) is that you can start with a small amount like Rs 100, Rs 250 or Rs 500 and gradually increase it. After capital market regulator SEBI gave its go-ahead to fund houses for low-value SIPs, many asset management companies (AMCs) have now allowed minimum investments starting from as low as Rs 100.
But despite the fund houses lowering the limit for minimum SIP investment, the average ticket size for SIP investments remained above Rs 2,000 in the country.
Start SIP with a small amount and increase it gradually
Not everyone can invest a large amount at once, but the biggest strength of SIP is that you can start small and increase the investment gradually, which is called the step-up approach.
You can start with a SIP of Rs 100 or even Rs 500 and as your income increases, you can also increase the investment amount.
For example, let’s say you start your SIP with Rs 500 and do a step-up of 10% every year, you will be surprised to know that by the end of 9th year the SIP amount will be more than Rs 1,000 per month.
Also read: SIP portfolio down by 20-30 pc in current market crash? Here’s how to recover
In this write-up, we will understand through calculations that how much time it takes to create a fund of Rs 1 crore if you invest per month Rs 2,000, Rs 5,000 and Rs 10,000 in step-up SIPs while assuming a 15% annualised return.
SIP of Rs 2,000 (with 10% increase every year)
If you start an SIP of Rs 2,000 and increase it by 10% every year, then assuming an average return of 15% per annum, your fund can reach Rs 1.14 crore in 25 years.
Total investment: Rs 23.60 lakh
Interest income: Rs 90.83 lakh
Total corpus: Rs 1.14 crore
So, Rs 2,000 SIP with 10% step-up can help you reach your Rs 1 crore corpus goal in 25 years.
Rs 5,000 SIP (with 10% increase every year)
If you do an SIP of Rs 5,000 and increase it by 10% every year, your fund can become Rs 1.05 crore in 19 years at an annualised return of 15%.
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