SIP Calculator: If you increase a ₹1,000 SIP by 10% every year, how much money will accumulate in 20 years?
SIP Calculator: You can start a mutual fund SIP with a small amount. However, if you increase the investment amount annually, you can build a substantial corpus over the long term.
Suppose you start a monthly SIP of ₹1,000 and increase it by 10% every year for 20 years. Let’s see what kind of corpus could be generated at annual returns of 12% and 15%.
**Annual increase in SIP amount**
In the first year, you invest ₹1,000 per month. In the second year, the SIP rises to ₹1,100. In the third year, it becomes ₹1,210.
Similarly, the SIP amount is increased by 10% each year. By the 20th year, your monthly SIP will reach approximately ₹6,116.
**What will be the total investment over 20 years? ****
If you continue investing for 20 years, your total investment will be around ₹6.87 lakh, factoring in the 10% annual increase in the SIP amount.
The question now is: how large a corpus can this investment generate after 20 years? This depends on the returns earned.
**Corpus generated at 12% and 15% returns**
| Estimated Annual Return | Total Investment (20 Years) | Estimated Corpus (After 20 Years) | Estimated Returns Earned |
| :--- | :--- | :--- | :--- |
| 12% | ₹6.87 lakh | ₹19.69 lakh | ₹12.82 lakh |
| 15% | ₹6.87 lakh | ₹27.49 lakh | ₹20.62 lakh |
**How much extra money at a 15% return?**
There is a difference of only 3% between the two rates of return. However, the impact on the final corpus after 20 years is significant.
At a 12% return, the estimated corpus is around ₹19.69 lakh. At a 15% return, it can reach approximately ₹27.49 lakh. The difference between the two is about ₹7.80 lakh.
**Benefits of a Step-up SIP**
With this strategy, you can start with a small amount. Later, as your income grows, you can increase your SIP contribution. This increases both the total investment amount and the benefits of compounding over the long term.
However, this calculation is merely an estimate. Returns of 12% and 15% have been assumed to remain constant over the entire 20-year period. There are no guaranteed returns in mutual funds; actual returns may vary based on market fluctuations.
Keep these 5 points in mind:
Increasing the SIP amount every year is not mandatory. First, assess your income and expenses, and choose a 'Step-Up SIP' amount that you can sustain over the long term.
Do not assume returns are guaranteed. The 12% and 15% figures are only estimates; actual returns in the stock market could be higher or lower.
Invest for the long term. Stopping your SIP due to a market downturn midway can reduce the benefits of compounding.
Increasing the SIP annually adds to your investment burden. Therefore, it is advisable to plan SIP increases in line with salary increments.
Prioritize an emergency fund and insurance. It is essential to have an adequate emergency fund and necessary insurance coverage in place before investing.
Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
