Do you want something additional or just normal that everyone else get? Whether it’s your physical work out or engine oil or learning curve, you’ve always got to add a little ‘something’ to get more mileage…

It’s that way with your SIP investments too. But way simpler with smart strategic planning in a long term.

The Mantra: Systematically Increasing your investments in Systematic Investment Plans! – Helps you achieve your financial goals earlier.

“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.”

-Warren Buffet

Your income is moving up over time and therefore your static SIP does not provide for your additional saving capacity.

Equity mutual funds have emerged as an intelligent way of creating wealth in the long run due to compounding benefit. If you use systematic investment plans (SIP), you also get the benefit of rupee cost averaging (RCA) and can gather Units in a disciplined way. What RCA(rupee cost averaging) does is to reduce your cost of holding the mutual fund units over a longer period of time. In fact, SIP works very well when there is volatility in the market since it is almost impossible to perfectly catch the highs and lows of any stock.

A static SIP refers to a SIP where the monthly contribution remains constant through the life of the SIP. So whether you run the SIP for 10 years or 20 years, your monthly SIP contribution remains the same. Now, there is a problem here!

Your income levels do not remain the same over time. Normally, your income is moving up over time and therefore your static SIP does not provide for your additional saving capacity. The answer to this challenge can be a step-up SIP. A step-up SIP is the same as a static SIP in all respects; the only difference being that the monthly SIP contribution is increased every year based on pre-set rule. For example, if you are contributing Rs10,000 in your SIP, you can step it up by 10% each year. So your monthly SIP contribution will be (Year 1 – Rs10,000/, Year 2 – Rs11,000, Year 3 – Rs12,100, Year 4 – Rs13,310 and so on). The SIP can be stepped up each year based on a fixed sum or a fixed percentage.

Step-up SIP, also popularly known as top-up SIP, is an automated facility through which SIP contribution can be increased by a predetermined fixed amount, or a fixed percentage, at periodic intervals in line with your financial goals and level of income. “Step-up SIPs allows investors to automate their SIP contribution and increases in sync with their expected growth of income. With automated incremental investing, SIP investors can derive greater benefit from the power of compounding and thereby reach their financial goals sooner.”


An investor named Mr. Modi starts a conventional SIP of Rs 10,000 and another one named Mr. Shah starts a step-up SIP with the same amount of Rs. 10,000, increasing investment by Rs. 1000every year from the second year onward for 20 years.

At the end of an investment term, the total corpus built by Mr. Modi will be Rs 98.92 lakh, which is barely half of the Rs 1.58 crore accumulated by Mr. Shah (refer to table)

Normal SIP Vs. Step-Up SIP
Particulars Normal SIP of Mr. Modi Step-Up SIP of Mr. Shah
Monthly SIP (Rs.) 10,000 10,000
Annual Step-up from 2nd year onwards Nil Rs. 1000
SIP Tenure (Years) 20 20
Expected Returns (%) 12% 12%
Total Investment (Rs.) 2400000 46,80,000
Extra Investment due to Step-up 22,80,000
Final Corpus (Rs.) 98,92,554 1,58,49,640

SIP Step Up Amount Invested Summary:

Year SIP Amount / Month Invested Amount / Year Total Invested Amount
Year1 10,000 1,20,000 1,20,000
Year2 11,000 1,32,000 2,52,000
Year3 12,000 1,44,000 3,96,000
Year4 13,000 1,56,000 5,52,000
Year5 14,000 1,68,000 7,20,000
Year6 15,000 1,80,000 9,00,000
Year7 16,000 1,92,000 10,92,000
Year8 17,000 2,04,000 12,96,000
Year9 18,000 2,16,000 15,12,000
Year10 19,000 2,28,000 17,40,000
Year11 20,000 2,40,000 19,80,000
Year12 21,000 2,52,000 22,32,000
Year13 22,000 2,64,000 24,96,000
Year14 23,000 2,76,000 27,72,000
Year15 24,000 2,88,000 30,60,000
Year16 25,000 3,00,000 33,60,000
Year17 26,000 3,12,000 36,72,000
Year18 27,000 3,24,000 39,96,000
Year19 28,000 3,36,000 43,32,000
Year20 29,000 3,48,000 46,80,000

3 Reasons to choose a SIP TOP – UP

A SIP Top Up increases your SIP instalment amount over a chosen period, allowing you to TOP-UP your investments with your rising income. Choose to TOP-UP your investments and:

  • Increase your investments with increasing income automatically
  • Manage your financial goals better
  • Reach your financial goals faster

 How is a step-up SIP- an improvement over the static SIP?

Compared to the static SIP, where your monthly contribution to the SIP remains constant throughout, the step-up SIP increases the contribution over time. Here are 4 distinct advantages that step-up SIPs offer:

  1. Step-up SIPs are more realistic because your investment contribution is being linked to your income levels. When your income is increasing over time, it is not prudent to keep the SIP amount static. Step-up SIP overcomes that challenge by increasing the SIP amount each year.
  2. A step-up SIP is a compulsory additional investment each year. Normally, when income increases, the tendency is to spend the money. A step-up SIP enforces the discipline of higher investments each year so automatically you only get to spend the residual amount. That is a good discipline to enhance wealth.
  3. A step-up SIP enables the investor to focus their entire financial planning activity around just a couple of funds. Otherwise, each year investors tend to keep adding new funds and create a portfolio of too many different equity funds which actually becomes hard to track and manage. A step-up SIP actually takes care of that problem.
  4. Helps to fight inflation:The cost of goods & services increases due to inflation. Something that costs Rs. 1 lac today will cost Rs. 1.22 lacs at the end of 5 years, assuming an inflation rate of 4.0% per annum.

It is thus very important to increase the contribution to an investment plan so that any deviation in inflation or expected return will not affect an investor’s goal.

Small Investment amount increase every year will not cost more but once sufficient time has been provided by staying Invested in market, Highest returns can be achieved at the time of requirement due to the magic of TIME in market and COMPOUNDING EFECT of money invested.

Below is an analysis of 4 scenarios over a period of 10 and 20 years to depict how your investments would’ve grown in a step-up SIP as compared to a regular one:

  • An SIP of ₹10,000 with a yearly increment of ₹1,000 for 10 years (= ₹30.23 lakhs)
  • An SIP of ₹10,000 with no increment for 10 years (= ₹22.25 lakhs)
  • An SIP of ₹10,000 with a yearly increment of ₹1,000 for 20 years (= ₹1.58 crores)
  • An SIP of ₹10,000 with no increment for 20 years (= ₹98.92 lakhs)
Starting Investment (₹): 10000
Increment Frequency: Yearly
Expected Return (%): 12
Duration (in years): 10 20
Increment (₹): 1000 0 1000 0
Expected corpus (₹): 30,23,426 22,25,619 1,58,49,650 98,92,554

As you can see, with a modest increase in the investment amounts, there is a significant difference in its eventual valuation. Just opt for a Step-up SIP; in line with your present income, prospective yearly increments and your financial goals. Feel free to consult your advisor for the same. It’s always a good idea to have a strategic plan in place, to reach the desired amount over a particular time period.

It is true that step-up SIP in mutual funds builds more wealth than conventional SIP’s. But the full credit cannot go to step-up SIP alone.

There are 3 entities which contribute to the gains of step-up SIP:

  • You yourself – for contributing higher amount each year.
  • Power of compounding – Which makes your money grow faster.
  • Mutual Fund – For generating the “desired returns”.

Had the mutual fund given “higher” returns to people who were investing using step-up SIP, we could have given more credit to mutual funds.

But the reality is this:
“good portion of the extra corpus built using start-up SIP is your own contribution”.

Step-up SIP is an upgraded version of conventional SIP which has an inbuilt feature to tackle inflation.

Step up your SIP TODAY to stay ahead from other crowd !!

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