Which SIP Will Build a Bigger Corpus: ₹25,000 with 2% Step-Up or ₹15,000 with 10% Step-Up?

In this article, we will compare the potential investment corpus built through two different SIP strategies: one with a starting amount of ₹25,000 and a 2% annual increase, and the other with ₹15,000 and a 10% annual increase. Both scenarios are based on a 20-year horizon with an expected return of 12%.

 Let’s dive into the details to determine which option yields a bigger corpus.

Scenario 1: Rahul’s Step-Up SIP of 2% Annually

In this scenario, Rahul starts with a SIP of ₹25,000 per month. He decides to increase his SIP amount by 2% every year, a common approach for those who expect their income to grow steadily.

Here are the details of Rahul’s investment journey:

• Starting SIP Amount: ₹25,000
• Duration: 20 years
• Annual Step-Up: 2%
• Expected Return: 12%

After 20 years, Rahul’s investment will grow significantly. The total value of his investment at the end of the period will be ₹2,81,98,658, with an invested amount of ₹72,89,304. The estimated returns come to ₹2,09,09,354.

Scenario 2: Rohan’s Step-Up SIP of 10% Annually

Now let’s look at Rohan, who starts with a SIP of ₹15,000 per month. While his initial SIP is lower than Rahul’s, Rohan opts for a more aggressive approach by increasing his SIP by 10% every year.

Here are the details of Rohan’s investment strategy:

• Starting SIP Amount: ₹15,000
  
   
• Duration: 20 years
  
   
• Annual Step-Up: 10%
  
   
• Expected Return: 12%
  
   

Despite starting with a lower SIP, Rohan’s choice of a 10% annual increase in contributions helps him build substantial wealth. The total value of his investment after 20 years reaches ₹2,98,33,396. The invested amount is ₹1,03,09,668, with an estimated return of ₹1,95,23,728. 

You can use the Step-Up SIP Calculator to calculate the potential returns and final corpus based on your monthly investment and annual step-up percentage.

How a Higher Step-Up Percentage Creates Bigger Returns

Rohan’s 10% annual increase in SIP has a more dramatic effect on his investment. Although he starts with a smaller monthly contribution, the significant step-up each year accelerates the growth of his corpus. In fact, Rohan’s final investment value is almost ₹3 crore, illustrating the power of a higher step-up percentage.

Read More: Two Cases of Step Up SIP: Check How Much 5% Step and a 10% Step Would Make a Difference to Your Corpus! 

Comparison and Key Takeaways

While both Rahul's and Rohan’s investments benefit from the concept of a Step-Up SIP, Rohan’s higher increase in contributions allows him to achieve nearly ₹3 crore by the end of the 20-year period. Despite starting with a smaller amount, his 10% annual increase played a crucial role in building wealth over time.

On the other hand, Rahul’s 2% step-up provides steady growth and a substantial return as well. It shows that even with smaller increments, the long-term effect can still be impressive, especially when compounded at a steady rate of return.

Conclusion

A Step-Up SIP is a valuable tool for investors who aim to create significant wealth over the long term. By gradually increasing SIP contributions, investors can enhance their returns and adjust to changes in income and inflation. Whether you choose a conservative 2% step-up or a more aggressive 10%, the key takeaway is that incremental increases, when compounded over time, can result in substantial wealth creation.

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.

Investments in securities are subject to market risks. Read all related documents carefully before investing.