A Systematic Investment Plan (SIP) is an excellent way to build wealth over time by making regular and consistent investments in mutual funds, and by increasing SIP investments, you can achieve bigger financial goals.
What is SIP Step-Up?
SIP Step-Up is an option which allows you to automatically increase your SIP contribution by a fixed percentage or amount at regular intervals (usually annually). This feature is offered by most fund houses, and it’s a great way to gradually build your investments which is often in line with your rising income.
- Compounding: Increasing SIP investment enhances the potential of compounding.
- Inflation: Steadily increasing your SIP contributions helps investments stay ahead of inflation.
- Growing Income: As your income increases, you can easily save more and invest.
- Long term goals: Meet financial objectives like retirement, buying a house, or funding education.
Regular vs Increasing SIP
When comparing regular SIP to an increasing SIP, it’s important to understand how each strategy affects wealth creation in the long run.
In regular SIP, you invest a fixed amount every month for the long term. Increasing SIP allows you to benefit more from compounding as you increase the SIP amount periodically.