Step Up Calculator: How a 5 Years of Delay Can Cost You Nearly ₹1.95 Crore?

A step up calculator can help explain how the timing of an investment journey affects the potential value of a corpus over the long term. The example of Ram and Shyam shows that even when two people begin with the same monthly SIP amount and follow the same annual increase, a delay of five years can lead to a significant difference in the final value of their investments. 

Ram and Shyam Start Their Careers Together 

Ram and Shyam completed their post graduation together and started working at the age of 24. Both had similar opportunities to earn, save and plan for their future. However, their approach towards investing was different. 

Ram decided to begin investing at the age of 25. He started a monthly SIP of ₹5,000 and increased his SIP amount by 5% every year. This gradual increase helped him invest more as his income rose over time. 

Shyam, on the other hand, chose to spend more on holidays, lifestyle expenses and other short term needs. He delayed his investment journey by five years and began his SIP at the age of 30. Like Ram, he started with a monthly SIP of ₹5,000 and increased it by 5% every year. 

Although the initial SIP amount was the same for both, the difference in their investment duration led to a major gap in their estimated corpus. 

Ram’s SIP Journey Over 30 Years 

Ram starts investing at the age of 25 and continues his SIP for 30 years. His initial monthly investment is ₹5,000, which increases by 5% every year. 

At an assumed annual return of 12%, Ram’s total invested amount over 30 years is estimated at ₹39,86,640. The estimated returns on this investment amount to ₹2,23,82,176. 

As a result, the estimated value of Ram’s investment after 30 years stands at ₹2,63,68,816. 

This illustrates how regular investing and a longer investment horizon can allow returns to compound over several years. 

Shyam’s SIP Journey Over 20 Years 

Shyam begins investing at the age of 30, which gives him an investment period of 20 years. He also starts with a monthly SIP of ₹5,000 and increases the contribution by 5% every year. 

At an assumed annual return of 12%, Shyam’s total invested amount over 20 years is estimated at ₹19,84,092. The estimated returns on this investment amount to ₹48,85,159. 

The estimated value of Shyam’s investment after 20 years stands at ₹68,69,251. 

While Shyam follows the same SIP approach after beginning his investment journey, his corpus remains lower because his investments receive less time to compound. 

A 5 Year Delay Creates a Difference of Nearly ₹1.95 Crore 

The difference between Ram’s estimated corpus and Shyam’s estimated corpus is approximately ₹1,94,99,565, or nearly ₹1.95 crore. 

Ram’s estimated corpus after 30 years is ₹2,63,68,816, while Shyam’s estimated corpus after 20 years is ₹68,69,251. 

This difference is not because Ram starts with a larger SIP amount. Both individuals begin with the same ₹5,000 monthly SIP and follow the same 5% annual step up. The key factor is the additional time available for Ram’s investments to compound. 

The earlier contributions made by Ram remain invested for a longer period. Over several years, the returns generated on these contributions also begin generating further returns. This compounding effect becomes more visible as the investment duration increases. 

Read More: Step Up SIP Calculator: SIP of ₹11,500 a Month Can Grow to More Than ₹10 Crore! 

Conclusion 

The comparison between Ram and Shyam shows that delaying the start of an SIP by five years can create a substantial difference in the estimated long term corpus. Using a step up calculator, the gap between the two investment outcomes is nearly ₹1.95 crore. 

Read stock market news in Hindi. Head to Angel One's share market news in Hindi for comprehensive coverage.   

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.