How much should you increase your SIPs every year?

Systematic Investment Plans (SIPs) are a popular and disciplined investment approach in financial markets. Investors can start with a modest amount and gradually increase their contributions as their income grows. This option to scale up the investment amount is a powerful tool for wealth accumulation. By increasing SIPs regularly, investors can benefit from the compounding effect on their existing investments every year.
According to a report, the SIP book has grown consistently from Rs 11,305 crore in December last year to an all-time high of Rs 17,073 crore in November 2023. This upward trend suggests a notable surge in investor participation and confidence in SIPs over the specified period.

• Table of contents

1. How much should you increase your SIPs every year?
2. Maintaining purchasing power
3. Consultation with financial advisor

How much should you increase your SIPs every year?

Increasing your investment gradually is a smart move to achieve your goals quickly. The amount by which you should increase your SIPs each year depends on various factors, including your income, financial goals, risk tolerance, and inflation. You can consider increasing your SIPs by about 5-6% every year, which is almost the same as inflation. This can help you build up your corpus faster. Here is how you can ensure a regular step-up in your SIPs:

Maintaining Purchasing Power

By matching your SIP amount with the rate of inflation, you can maintain the purchasing power of your investments over time. This can help your investment keep up with the rising cost of living, enabling you to stay on track with your financial objectives. This ensures the value of the investment grows over time, thereby boosting its resilience against inflation’s impacts and other wealth-diminishing factors.

Consultation with Financial Advisor

Before making any modification to your SIP amount, it is advisable to consult a financial advisor who can provide personalized guidance based on your unique financial situation and goals. Regularly reviewing and reassessing your investment plan can help you make informed decisions and adapt to changing circumstances.

Striking a balance in SIP adjustments, personalized to one's financial plan, is crucial for a sustainable and disciplined investment strategy. Establishing a resilient and disciplined investment strategy is essential for efficiently realizing your financial goals. This collaborative approach ensures that your financial journey is characterized by prudence and foresight, fostering long-term success.

FAQs:

How much will an SIP increase my corpus in 15 years?

The growth of your corpus over 15 years through an SIP is influenced by factors such as the monthly SIP amount, the rate of return on investment, and the compounding frequency. Utilizing an online sip growth calculator allows you to estimate the potential returns on your investment.

Why should you use a step-up SIP calculator?

Utilizing a step-up SIP calculator is instrumental in projecting the potential returns on your Systematic Investment Plan (SIP). This calculator factors in your monthly SIP amount, the rate of return on your investment, and the compounding frequency. With a step-up SIP calculator, you can ascertain the monthly investment required to meet your financial objectives.

Is there a specific rule for adjusting SIPs annually, or should it be based on market conditions?

While there's no fixed rule, many investors choose to increase SIPs annually to keep pace with inflation and growing financial goals. However, adjustments can also be influenced by changes in personal circumstances or market conditions. It's essential to strike a balance, considering both your financial capacity and the need for meaningful investment growth.

Should I consider increasing my SIPs during economic downturns or market corrections?

It can be a strategic move to consider increasing SIPs during market downturns. When prices are lower, your increased investment can buy more units, and as the market recovers, this could potentially lead to better returns. However, the decision should align with your risk tolerance and financial goals, and it's advisable to consult with a financial advisor before making such adjustments.

Mutual Fund investments are subject to market risks; read all scheme-related documents carefully. This document should not be treated as an endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.