Breakdown
How it works
Each monthly instalment compounds from the month it is invested, so early instalments contribute far more to the final value than later ones. A step-up SIP raises the instalment by a fixed percentage every year, matching salary growth and dramatically increasing the final corpus.
Formula
Worked example
10,000 a month at 12% for 10 years: invested 1,200,000; maturity ≈ 2,323,000. With a 10% annual step-up: invested 1,912,000; maturity ≈ 3,285,000.
Frequently asked questions
Is 12% a realistic return?
It is the conventional assumption for Indian equity funds based on long-run history, not a guarantee. Use 8–10% to be conservative; global developed-market equities have returned 7–9% nominal.
What is a step-up SIP?
A SIP where the monthly amount increases automatically each year (typically 5–10%). It lets contributions track your income and roughly doubles the corpus over 20 years compared with a flat SIP.
Is SIP better than a lump sum?
A lump sum invested at the start usually ends higher in a rising market; a SIP reduces timing risk and suits salaried investors. Most people should do both: SIP from salary, lump sums when available.
Is SIP investing halal?
The method is neutral; it depends on the fund. Shariah-compliant equity funds exist in India (Tata Ethical, Taurus Ethical), the GCC and the UK.