Stock market investment through Mutual Funds serves as the best option for passive investors. Systematic investment plans or SIP allow investors to contribute a fixed sum monthly or quarterly for a mutual fund investment to generate exponential returns after a significant period. The Systematic Withdrawal Plan helps investors withdraw a fixed sum at specific intervals from the invested corpus in Mutual funds. Both SIP and SWP serve as the best tools that investors can use to generate returns from Mutual fund investment and maintain adequate cash flow for regular use. Investors can even use SIP and SWP calculator to make the best decisions regarding investment and withdrawal as well. However, one can take the benefit of Step Up SIPs and SWPs which are modified versions of traditional SIP and SWP plans.
What Is a StepUp SIP?
A Step Up SIP differs from a simple SIP where investors increase their amount of investment at regular intervals like annually. For example, investors can increase their investment of ₹5000 every month by 10% every year to generate significant returns. They can increase their contributions towards the selected mutual fund by careful analysis of various factors like increments in salaryincome, inflation, and financial needs. The Step Up SIP helps generate a better investment corpus by taking the benefit of compounding and investing in small amounts that increase at specific intervals. Users can use a dedicated step up sip calculator to identify SIP amount, annual increase percentage, and the final returns on investment.
Benefits of Step Up SIP
1. Better Alignment with Income Growth:
Investors with an increase in their income can use the extra sum for investment thereby increasing the chances of generating better returns. With an increase in income, investors can save and invest more for better returns.
2. Beat Inflation:
With an increase in the SIP amount, investors can generate better returns than traditional SIP. This helps in beating inflation and getting access to a large investment corpus after the completion of a certain investment period.
3. Faster Wealth Accumulation:
A Step Up SIP allows investors to generate more wealth at a greater pace as compared to traditional SIP.
What Is a Step Up SWP?
A Systematic Withdrawal Plan (SWP) helps investors generate regular income by withdrawing a certain sum from mutual fund investments. A Step Up SWP, similar to Step Up SIP, allows investors to withdraw a sum from the investment corpus generated which increases periodically to fulfill the increasing financial needs.
Benefits of Step Up SWP
1. Steady Income:
A Step Up SWP helps investors get their hands on a fixed sum of money that can be used to meet their increasing financial needs. With rising costs and expenses, individuals can adjust the withdrawal amount through stepup SWP.
2. Customization:
Individuals receive the option to customize their withdrawal sum according to their needs and overall inflation. Furthermore, one can withdraw more for unforeseen circumstances like medical needs.
3. Tax Efficiency:
The withdrawals from SWPs are treated as capital gains which attract low tax making it a taxefficient way of earning income.
Conclusion
Step Up SIPs and SWPs are the best solutions that investors can use for growing and managing their wealth. With an increase in income level, investors can save and invest more for larger returns. Moreover, they can withdraw more depending on their financial goals and rising costs. Step Up SIPs and SWPs can help individuals fulfill their financial goals at a greater pace and with maximum efficiency.
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Image Credit: KhasKhabar.