How to get ₹2.17 crore from your ₹2,000 SIP investment? CA explains step-up SIP strategy

SIP investments are designed to provide secondary income to investors, giving them a safety net in the event of a financial crisis. SIP investments can also deliver sufficient financial power after retirement if pursued diligently.

Starting your SIP investment journey early is a milestone in itself, but investing the same amount every year may not allow you to maximise your gains.

According to CA Nitin Kaushik, who shares his views on X, an annual SIP step-up is the only way to grow your investments.

Let us see how the step-up in SIP works, based on the CA's example.

How step-up in SIP helps

“An annual 10% STEP-UP is the only mathematical savior for a small SIP,” CA Kaushik wrote.

He also gave an example.

If you start an SIP of ₹2,000 as a monthly investment at the age of 25, it will yield a value of roughly ₹70.6 lakh by age 55, assuming that you get a 12% return. However, according to the CA, an inflation of 6% “guts that future value to just ₹12.3 lakhs in today’s purchasing power.”

This means your investments will not yield as much as you expect when you consider inflation.

However, stepping up your SIP investment will change everything.

Increasing your monthly SIP investment by 10% every year will significantly increase the final corpus. According to Kaushik, you may get a yield of ₹2.17 crore, “transforming a stagnant hobby into a functional retirement fund.”

Why SIP step-up works?

According to the CA, a step-up in SIP works because you increase your principal each year as you grow in your career. This prevents lifestyle inflation from destroying the most productive decades of compounding.

“Consistency is a baseline requirement, but without scaling the input, time alone cannot fix a low starting point,” Kaushik says.

You can increase your contributions to an SIP at regular intervals by a fixed rate or a fixed amount. This way, you enhance the benefits of compounding while maintaining a strict financial discipline.

What is a step-up SIP?

A step-up SIP is an investment strategy in which you increase your SIP contributions in mutual funds by a fixed amount or percentage at regular intervals, for example, every year. A step-up SIP allows you to implement a planned increase in your investments, often aligned with your career growth.

This strategy also enables you to adjust your financial investments as the economic situation evolves, making it easier to reach your financial goals.

So, who should invest in SIP?

SIPs can be started by anyone over 18 by opening a demat account. SIPs are especially suitable for —

• New investors who are still finding out a way to manage markets and get the most out of them,
• Individuals with a steady source of income should keep investing at regular intervals.
• Individuals who seek decent returns without having to worry about high volatility.
• Investors who want to pursue a long-term investment goal.