While its a no brainer that mutual fund SIPs are quickly gaining lot of popularity since last decade, step up SIPs too are the hidden gems that need such popularity among investors. Unlike the regular SIPs that have set periodic payments, step up SIPs let investors gradually raise their investment amount like 5% every year, which thus adjusts to their changing income and changing financial goals. To help them reach their targets and determine suitable annual increases, investors project future investment values using sip calculator step up tool, so evaluating the effect of increasing SIP amounts.
The step up sip calculator is a tool that enables investors to estimate the future value of their systematic investment plan’s investments. It helps investors decide on the ideal annual increment to suit their SIP preference as well as financial goals.
Using the step up sip calculator, a projection of how your investments would grow over time, you can plan and see with these little contributions. In this sense, subject to market risks, you can choose your investments with knowledge and ensure you reach your financial goals.
FAQs on step up SIPs
Q1. How to use sip calculator step up tool?
You have to enter the following data to make use of it: Initial monthly SIP investment amount; SIP length expressed in years; expected rate of return on the investment, and monthly SIP annual % increase value.
Once all these data are entered, the calculator creates the projected future value of your SIP investment, which helps support financial planning and goal setting.
Q. For which type of investors does Step-Up SIP become suitable?
Those who wish to create long-term wealth would be fit for step-up SIPs since they allow investors to progressively raise their investment level over time.
Q. With what accuracy does the step up SIP calculator tool estimate the returns?
The sip calculator step up tool offers calculations, but it’s crucial to realise that since mutual funds, influenced by market risk, are naturally erratic and cannot guarantee the precise returns of investments.
Q4. Can the step-up amount be changed at some point?
Investing portals may allow you vary the step-up percentage based on your financial situation and the respective website’s rules.
Q5. Do sukanya samriddhi investors also get an online calculator tool like step up SIP?
Yes. If you have invested in sukanya samriddhi yojana for your girl child’s future, you can use the online sukanya samriddhi calculator to estimate your expected corpus after a certain tenure, as per the expected returns and invested amount.
Mistakes to avoid when investing in mutual fund SIPs
- Stopping the SIPs without any reason
As SIPs are beneficial when you routinely begin investing a set amount at a set date and frequency—weekly, monthly, quarterly, etc.—regardless of the current NAV or market level, stopping your SIPs without any reason and redeeming them, can be a big mistake. Try to continue the SIPs every time and avoid stopping them until its absolutely an emergency and you need the funds.
- Ignoring the power of compounding.
Unlike FDs, PPF, NSC, etc, history has clearly shown that equities (including mutual funds) have regularly given inflation- beating returns. Particularly to build a sizable corpus for financial goals like down payment on your dream house, child’s higher education corpus, or your retirement corpus, a long term investment is required to enjoy compounding. So, if you ignore the power of compounding and choose to redeem your SIPs in short term only, you can miss out on big returns in the long term.
- Not utilizing the flexibilities offered to SIP investors
While its true that once you have chosen the particular financial goals and desired corpus amount, you must choose the debit frequency of your SIP (such as monthly, quarterly or annually) depending on your financial situation, current income, and regular expenses. But keep in mind that there are flexibilities that you can utilize if required, such as pausing the SIP, restarting the SIP, stepping up the SIP, etc
Most fund houses also let you choose the top-up/step-up amount/percentage right at the start of the SIP, so guide your SIP amount going forward. Only some fund houses, meanwhile, provide the ability to step up an ongoing SIP, whereby you can periodically raise an existing SIP by a specified percentage—say, 5% annual increase. Still, you can align your financial goals with your present income as well as with expected yearly increases. Step up facility helps the investor to reach the specified investing amount over a period of time, or in case the target corpus “increases due of any reason or unexpected emergency.”
- Choosing regular plans over direct plans
Unlike regular mutual fund plans whereby intermediaries and fees connected with them are involved, direct plans let the investor buy mutual funds straight from the fund houses. Higher returns, better NAVs and almost 1-1.5% lower expense ratio direct plans offer than standard plans. Investors wishing to invest in SIPs can visit online financial markets providing direct plans, which would better illustrate their advantage. By offering automated advisory services to help every client choose the correct plans and create portfolio, such portals also help new investors to invest in direct plans. Furthermore, these kinds of services are available completely free of charge on certain internet sites.
- Never reviewing your SIP portfolio’s performance
Remember that your task is not finished yet even after you have selected the appropriate money to create portfolio and started investing in step up SIPs. Review the portfolio on occasion to monitor the performance of the selected funds. You should exit such funds if your current funds have been underperforming regularly since a few quarters (at least three-four quarters), have changed their fund managers or management style. Keep checking the performance of your fund against other peer funds in its category and benchmark indices. By doing this, you will be able to properly assess the performance of your present funds and exit them timely to prevent any damage or impediment on the way your corpus is created.