Mutual fund investment: How a 5% yearly SIP increase can transform small investments into big wealth

A growing number of financial planners are urging investors to rethink how they use Systematic Investment Plans (SIPs), arguing that a simple upgrade—the Step-Up SIP—can dramatically accelerate long-term wealth creation. Unlike a standard SIP, where the monthly contribution remains constant, a Step-Up SIP allows investors to increase their investment amount annually, typically by 5–10%. This small, systematic rise can double the final corpus without requiring drastic lifestyle changes.

Financial planners say the real power lies in “compounding your contributions,” not just compounding returns. Over time, the increasing SIP amount creates a multiplier effect that static SIPs simply cannot match. The approach is particularly beneficial for young earners whose incomes rise steadily each year.

Highlighting this, CA Nitin Kaushik shared a real-life example on X (formerly Twitter) that has since gone viral among retail investors. “One of my clients from Pune, 35 years old, came to me saying he could only invest ₹12,000 per month,” Kaushik wrote. “I told him: If you can increase this SIP by 5% every year, I will take care of the rest.”

Kaushik emphasised that discipline matters more than starting capital. His message was simple: wealth creation is not about timing the market or chasing fast gains—it’s about staying invested through cycles. “Don’t celebrate the bull run too much. Don’t fear corrections too much,” he advised. “Market cycles don’t demand perfection from you—they just demand that you stay.”

According to experts, Step-Up SIPs act as an inflation hedge, a behavioural tool, and a long-term accelerator of financial goals. For new investors, the message is clear: consistency beats intensity. As Kaushik puts it, “Money grows fastest when you stop trying to make it go fast.”

Why Step-up SIPs supercharge long-term wealth creation

The principle of compounding is familiar to most investors—but its true strength emerges when you combine it with rising contributions. A Step-Up SIP amplifies wealth creation not just by compounding returns, but by compounding the amount invested every year.

1. Step-Up SIP vs doubling investment

The comparison speaks for itself:

SIP Type    Annual Step-Up    Total Invested    Estimated Corpus

Fixed SIP    0%    Rs 9 crore    Rs 47.6 crore
Step-Up SIP    5%    Rs 16.2 crore    Rs 93.2 crore

A Step-Up SIP increases the total investment by only 1.8x, but the final corpus becomes nearly 2x larger, generating an extra Rs 45 crore.

This is the “second layer of compounding”—not just returns compounding, but your contributions compounding too.

2. Shield against inflation

A fixed SIP might feel comfortable today, but inflation steadily erodes its relevance.
A Step-Up SIP acts as an in-built inflation hedge—ensuring your investments grow at least as fast as your income and rising expenses.
This protects future goals from shortfalls caused by today’s static approach.

3.Goal achievement

Increasing your SIP even modestly each year can significantly reduce the time needed to hit large financial milestones:

Rs 5 lakh monthly SIP @ 14% may take 24–25 years to reach a Rs 50 crore goal.

Adding a 5% annual step-up reduces this to 17–18 years.

That’s nearly a decade saved simply by committing to systematic increases.

4. Eliminating errors

Investors often delay increasing SIP amounts due to fear, market noise, or inertia.
A Step-Up SIP removes the need for manual intervention—once set, contributions rise automatically.
This builds discipline, prevents overthinking, and strengthens long-term consistency—qualities proven to create wealth.

5. Simple strategy

Most investors know the power of SIPs. Few realise that even a small 5% yearly increase can dramatically shift results.
You don’t need drastic lifestyle changes—just the foresight to start with a smarter structure.