| A Systematic Investment Plan (SIP), more popularly known as SIP, is a facility offered by mutual funds to the investors to invest in a disciplined manner. SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme. |
Benefits of SIP Investing
Power of Compounding
When you invest regularly through SIP and invest for the long term, the benefits are magnified by the compounding effect. Compounding effect ensures that you earn returns not only on your principal amount (actual investment) but also on the gains on the principal amount i.e. your money grows over time as the money you invest earns returns. And the returns also earn returns.
Power of Starting Early
The earlier one starts saving and investing regularly, the easier it is to achieve your goals. The graph below shows the impact of beginning to invest Rs.5,000 monthly at various stages of life till the age of 60 years (assuming a return of 12% p.a.).
the above graph is for illustrative purpose only.
Source : Internal
5 Years’ early start result in an additional Rs. 1.21 crore in the final retirement corpus.
Amount invested via SIP
Value of investment on Retirement
If you start SIP at age 25, as per the illustration shown a corpus of approximately Rs. 2.76 crores can be generated at retirement. If you would have waited 5 years and started SIP at age 30, a corpus of approximately Rs. 1.54 crore would have been available to you at retirement i.e. a difference of Rs. 1.21 crore – which is the ‘cost of delaying starting SIP’
Top Up SIP
Top-up SIP is a facility that lets you increase your SIP by a fixed amount or percentage (say 10%) every year or at pre-defined intervals in line with an increase in your income/savings.
This Top -Up in your SIP allows your investments to be in line with the increase in the cost of living or inflation and helps you plan for your financial goals right. It can also help you reach your financial goals earlier or create a larger corpus for your goal.
Mr.A
Normal SIP Plan
SIP Amount
₹ 5000
Investment Details
started investing 5,000/month
using Normal SIP for 25 years
with 12% Rate of Interest
Total Investment
₹15,00,000
Final Corpus after 25 years
₹ 95,00,000
SIP CALCULATOR
Mr.B
SIP with 10% Top-Up Plan
SIP Amount
₹ 5000
Investment Details
started investing 5,000/month
using SIP with 10% Top-Up
for 25 years with
12% Rate of Interest
Total Investment
₹ 59,00,000
Final Corpus after 25 Years
₹ 2.07 Crores
