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One of the best ways of entering equity market is through Systematic Investment Plans (SIP) in equity mutual funds. SIPs help in achieving financial goals by investing small amount of money on a monthly basis into mutual fund/funds that eventually lead to accumulating the required corpus for reaching the goal. Most importantly, it brings in an investment discipline for the investor and reduces risk because of Rupee Cost Averaging.

Can we make this strategy better? I believe we can make it better specifically around the investment discipline…let me explain in detail…

Most of us increase our earnings by 5-10% yearly…sometime less, sometimes more…. but over a long time, it would be in that range or more. If you started your career at a salary for 3 LPA and after 20 yrs…its 20 LPA…you are growing at 10%, If you started at 2 LPA and in 15 yrs …you are at 16LPA…you are at 15% growth…Does this growth in salary/earnings translate to increased investments in that proportion?
For the most of us… the answer is NO. We might do it randomly but most of us would not increase the investments every year judiciously…

SIP’s work because it’s a disciplined way of investing, the money will automatically get invested every month. If we had to do it manually… we would skip it for one or the other reason…and would find ways to keep postponing it…It’s the same with increments… Our needs will increase/catch-up to meet the increment and we will always run short of money to save. And hence a good solution will be to automate the saving of increment…like we did with SIP.

Its called Step Up/Top up SIP – When you start an SIP, you have to give an additional instruction of increase the SIP amount by a certain amount or percentage every year. For Eg you start an “Step Up SIP” for Rs 10000/month with an annual increment of 10%.
For the first year, The SIP amount will be Rs 10000/Month
For the Second year the SIP amount will be Rs 11000/Month
For the Third year the SIP amount will be Rs 12100/Month

The 10% increment of investment will actually not affect your life style that much…for e.g. If your salary currently is Rs 1 Lakh/month and you invest Rs 30K/month…Now when you get a 10% increment…your salary would increase by Rs 10K but your investments will increase by only Rs 3K/-

Now let me show you the advantage of doing this….

SIP/Month Rs 10000 Rs 10000 Rs 10000
Step-Up – Yearly 0 Rs 1000 10%
Tenure 20 yrs 20 yrs 20 yrs
Investment 24 Lakhs 46.80 Lakhs 68.73 Lakhs
Growth 12% 12% 12%
End value 1 Cr 1.6 Cr 2 Cr

As you can see, with step up SIP, It keeps you disciplined towards allocating a certain portion of your yearly increment towards investments and helps you save more and hence you will be able to accumulate much more wealth than a regular SIP.

Here is another example of goal-based investing…Suppose your retirement goal is 3 Cr and you invest in a fund that can generate 12-13% CAGR



SIP/Month Normal Step up Target
Rs 10000 29 Yrs 23 Yrs 3 Cr
Rs 20000 23 Yrs 18 Yrs 3 Cr


Hope this was helpful…We can help you plan & invest for any or all of your financial goals…email or call to book an appointment for a discussion – / 9916804769

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Happy Investing