Annual top-up can help you double your mutual fund investment

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Mutual Fund Calculator: When an investor starts any investment plan, its major objective is to grow one’s money at such a pace that can help him or her meet its investment goal. To meet long-term investment goal, mutual fund investments are fast growing as it allows an earning individual to investment in monthly mode via Systematic Investment Plan (SIP). According to tax and investment experts, mutual fund SIP helps an investor to accumulate fund for long-term goals like retirement fund, child marriage, higher education of the child, etc. However, they cautioned the investor to maintain the discipline and continue investing in SIP mode without getting bothered by the market movement.

Speaking on the mutual funds SIP investment tax and investment expert Jitendra Solanki said, “Mutual fund SIP investment is helpful for those professionals who are in the nascent phase of one’s career. It allows the investor to go long for 25 to 30 years as mutual fund SIP can be started at 25-30 years of age when the professional has just started to earn.” He said that in early phase of one’s career, one can go for the higher risk and opt equity mutual fund that gives at least 12 per cent return in long-term of 25 to 30 years.

So, let’s assume an investor invests 6,000 per month in mutual funds SIP for 30 years assuming. Then assuming 12 per cent annual return the mutual fund calculator suggests that the investor will 2,11,79,483.

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Source: Groww SBI Mutual Fund Calculator

Out of this 2,11,79,483 the investor will get 1,90,19,483 interest on one’s money while its net investment over the period will be 21,60,000.

However, Kartrik Jhavewri, Director — Wealth Management at Transcend Consultants said that investing same 6,000 per month in mutual funds SIP for 30 years is not advisable as one’s income grows after a regular period. He advised the mutual fund investor to increase the investment amount in sync with one’s annual income or say 10 per cent. Jhaveri was of the view that it will have big impact on the net maturity amount one would be getting at the time of redemption.

Assuming the same 6,000 per month mutual fund SIP investment for 30 years with 10 per cent annual increase in one’s investment, the mutual fund calculator suggests that one net maturity amount after 30 years will be 4,80,75,434 — which is more than double of the maturity amount without annual step-up.

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Source: Piggy Mutual Fund SIP Step-up Calculator

Out of this 4,80,75,434 maturity amount in mutual fund step-up plan, one’s net investment over the period will be 1,18,43,570 and the net interest earned is 3,62,31,864.

So, it’s advisable to invest with step-up mode as it helps the investor get benefit of increase in one’s income by increasing the investment amount.

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