Regular vs step-up SIPs: Do ₹1,000 and 10% annual top-ups give you higher XIRR returns or just create a larger corpus?

If you invest through a systematic investment plan ( SIP ), increasing your contribution as your income and expenses rise can help you keep pace with inflation and stay on track with your financial goals. A step-up SIP allows you to increase your investment periodically by a fixed amount or a percentage.

But does increasing your SIP contribution by a fixed amount of ₹ 1,000 every year improve returns and wealth creation? A comparison of regular SIPs, fixed top-up SIPs and variable top-up SIPs in the BSE Sensex TRI, based on the latest SIP Analysis report by WhiteOak Capital Mutual Fund, offers some insights.

A normal (or regular) SIP involves investing the same amount every month in a mutual fund scheme. A fixed top-up SIP increases the monthly contribution by a predetermined amount annually, while a variable top-up SIP raises it by a fixed percentage each year.

In a fixed top-up SIP, you increase your monthly contribution by ₹ 1,000 every year. In a variable top-up SIP, a ₹ 10,000 monthly contribution increases by 10% annually, rising to ₹ 11,000 in the second year, ₹ 12,100 in the third year and so on.

The following table compares the investment amount, current value and annualised returns (XIRR) across different investment periods.

The comparison shows that increasing contributions can significantly raise the final corpus over the long term. An investor who started a ₹ 10,000 monthly SIP 25 years ago in BSE Sensex TRI would have invested ₹ 30 lakh and accumulated ₹ 209.90 lakh by 30 September 2026, with an XIRR of 13.24%.

With a fixed annual top-up of ₹ 1,000, the total investment would have risen to ₹ 66 lakh, resulting in a current value of ₹ 318.22 lakh and an XIRR of 12.70%.

Under the variable top-up strategy, which increases the monthly SIP contribution by 10% annually, the investor would have invested ₹ 118.02 lakh and accumulated ₹ 413.56 lakh, with an XIRR of 12.32%.

Thus, both step-up SIP strategies generated a higher final corpus than the regular (or normal) SIP across all the investment periods. However, this came at the cost of higher contributions, with both fixed and variable top-up SIPs delivering lower XIRRs than the regular SIP. A larger corpus does not necessarily translate into a higher rate of return.

Over the 20-year period, the regular SIP delivered an XIRR of 10.81%, compared with 10.72% for the fixed top-up SIP and 10.54% for the variable top-up SIP. The regular SIP delivered a higher XIRR across all the investment horizons, while the variable step-up SIP created more wealth than the fixed step-up SIP.

The key takeaway for investors is to choose a top-up amount they can sustain as their income grows, rather than focusing solely on the final corpus. The BSE Sensex TRI serves as a benchmark for mutual fund performance, but these figures represent index returns and not the actual returns of any mutual fund scheme.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice.