Most mutual fund investors initially start with a small SIP amount because they want to test the market and understand how SIP investing works. Many enter the market with several myths and misconceptions, so they prefer to begin cautiously. While some investors increase their SIP amount as their income grows, many continue with the same contribution for years without considering changes in their income or evolving financial goals. But when income rises each year while expenses remain stable, sticking to the same SIP amount can limit long-term wealth creation.
The concept of a step-up SIP has long been an option for investors aiming to create substantial wealth. This strategy allows them to increase their SIP amount slightly each year, often in line with income growth. It helps investors manage their investments efficiently without financial stress and enables them to take steady steps toward building a larger corpus over time.
What’s the basic difference between a fixed SIP and a step-up SIP?
In a fixed SIP, you invest a fixed amount every month and this amount remains unchanged throughout the investment period. This means that whether your income increases or your goals change, the SIP remains the same as initially determined.
Meanwhile, a step-up SIP allows you to increase your SIP amount slightly every year. This increase is typically in line with your annual salary increase —such as 5%, 10%, or as much as you’re comfortable with.
In this way, a step-up SIP allows your investments to grow as your income increases, allowing your corpus to grow faster over the long term.
How a small yearly increase creates a big impact
On paper, a 10% annual increase looks modest. But over 20–25 years, these incremental bumps compound dramatically. Financial planners say step-up SIPs reflect real-life income growth and therefore help investors contribute more without feeling stretched.
How a 10% step-up can build nearly 2x the corpus
Example 1: Fixed SIP
An investor starting with Rs 10,000 per month and continuing with the same amount for the next 25 years. Here, we assume the rate of return on SIP investment at 15% CAGR.
Monthly SIP: Rs 10,000
Rate of annualised return: 15%
Total investment: Rs 30 lakh
Total returns on investment: Approx. Rs 2.46 crore
Total value after 25 years: Approx. Rs 2.76 crore
Example 2: Step-up SIP
Now, consider another example where an investor starts an SIP of Rs 10,000 and applies a 10% step-up every year for the next 25 years. Here again, we assume the rate of return on the SIP investment to be 15% CAGR.
Monthly SIP: Rs 10,000
Annual step-up: 10%
Rate of annualised return: 15%
Total investment: Rs 1.18 crore
Total returns on investment: Approx. Rs 4.54 crore
Total value after 25 years: Approx. Rs 5.76 crore
These examples show how powerful a simple 10% annual step-up can be. While a fixed SIP of Rs 10,000 grows to about Rs 2.76 crore in 25 years, adding a modest yearly increase more than doubles the final corpus to around Rs 5.72 crore.
Why a fixed SIP may fall short of long-term goals
Fixed SIPs are ideal for beginning investors because they require a fixed amount to be invested each month. However, when it comes to larger, longer-term goals — such as retirement, children’s education, or buying a home—a fixed SIP amount alone is insufficient to achieve these goals.
If your income is increasing every year, but your SIP remains the same, you fail to take advantage of the true power of compounding. As a result, your corpus doesn’t grow as large as it could.
Conclusion: A small change, but a big impact on your corpus
For investors looking for a simple and practical way to accelerate their wealth creation, a step-up SIP is a highly effective and manageable option.
Increasing your SIP amount by just 10% each year can significantly increase your final corpus over time—without any additional stress or significant impact on your budget.
This small step gradually strengthens the foundation for your financial future and moves you closer to your long-term goals.