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If you want to become a millionaire in today's time, then there is nothing wrong with it. With the way inflation is increasing rapidly, the value of the rupee will be affected further in the coming time. In such a situation, after some time, the value of 1 crore will not be very big. Therefore, do not just 1 crore, add such an amount that there is no shortage even after 20 to 25 years from today.

The good thing is that now this is not a very difficult task. In the world of investment, a Systematic Investment Plan (SIP) can turn this dream into reality. But do you know that there is a smart way in SIP too, which can take you to your goal even faster? We are talking about Step-up SIP. Often, investors are in a dilemma whether they should do a Normal SIP or a Step-up SIP. Know here that if you have to create a fund of 5 crores, then which method is most effective?

First of all, let's understand what a normal SIP.

Normal or regular SIP is the most straightforward and popular way of investment. In this, you invest a fixed amount in your favorite mutual fund scheme every month on a fixed date. This amount remains the same from the beginning till the end of your investment. This is a great way of disciplined investment, but your investment does not get the benefit of your increasing income.

Now, know, what is the magic of Step-up SIP?

Step-up SIP, as the name suggests, gives the option to increase your investment from time to time. It is also called a top-up SIP. In this, you increase your SIP amount by a certain percentage or a fixed amount every year. Think, every year there is some increment in your salary. Why not add a small part of that increasing salary to your investment? Step-up SIP does exactly this. It also increases your investment along with your increasing income, due to which the power of compounding (interest on interest) works even faster.

Target of 5 crores, who will reach it first?
Let us now come to the most important question. Let us assume that your target is to create a fund of ₹5 crore and you are planning to start a SIP of ₹20,000 every month. We also assume that your investment will give an average return of 12% per annum. Now let us see how much time it will take to achieve this target using normal SIP and step-up SIP (with 10% annual increase).

Parameters Normal/Regular SIP Step-up SIP
Target amount ₹ 5 crore ₹ 5 crore
Initial monthly SIP ₹ 20,000 ₹ 20,000
Annual step-up 0% 10%
Estimated return 12% per annum 12% per annum
Time taken to achieve target: Approximately 29 years, Approximately 22 years
(Note: This calculation is based on estimated returns. Actual returns may vary depending on market performance.)

Which is better?
It is clear from the above calculation that with a normal SIP, it will take you about 29 years to reach the target of Rs 5 crore. A total of Rs 5,47,89,406 will be deposited in 29 years. On the other hand, a SIP with a 10% annual step-up will complete this task in just 22 years. In 22 years, a fund of Rs 5,05,55,780 will be accumulated. This is the real power of step-up! Initially, there will be no difference between the two, but as the years pass, your invested amount in step-up SIP will increase and the effect of compounding on it will increase manifold.

Which SIP is right for you?

Step-up SIP
This is the best option for all those working people whose income increases every year. It helps your investment to keep pace with your increasing income and reaches the goal faster.

Normal SIP
This can be a good option for those who have a fixed income or who are very disciplined about their expenses and cannot increase the investment amount. Having a regular SIP is always better than having nothing.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.