What is SIP Top-up, and what are its benefits?


SIP also comes with a Top-up facility

SIP Top-up facilitates increasing investment with time

As a mutual fund investor, you must be well aware of investing in mutual funds through a Systematic Investment Plan (SIP) by contributing a fixed amount every month, which is easy, flexible and rewarding at the same time. A minimum amount of Rs 500 can even be invested every month, or you can choose any intervals such as daily, weekly, fortnightly, monthly, quarterly, half-yearly and annually. Over time, small capital investments can grow exponentially with the power of compounding.

SIP also comes with a Top-up facility. Investors are also advised to use the SIP Top-up facility to build their assets in line with their income growth and ability to take a risk over a period. Here is some useful information on SIP Top-up and its benefits.

What is SIP Top-up?

Every year as your income grows you are likely to have more money available to invest. SIP Top-up is the top-up facility to keep your savings growing in line with your income. In a SIP Top-up, you can increase the monthly SIP installment periodically. You can specify SIP Top-ups as a percentage of the existing SIP amount, say 10% or a fixed amount, say in multiples of Rs 500 every year. The frequency of increasing the amount is usually half-yearly or annual.

Certain things you need to know:

  • The upper limit to cap the top-up can be specified, which may be in terms of the amount or the month and year.
  • When the defined cap is reached, topping-up the SIP will stop.
  • The SIP will continue for the tenure for which the investor has signed up.
  • After you apply, the top-up SIP facility becomes effective after 30 days and applies in every 11th month to ensure the top-up gets activated at the beginning of the next year and so on.
  • Once you sign up for a top-up facility, it cannot be changed.
  • If you find your income would not support the periodic increases, the best option is to cancel the SIP.

What are the benefits of SIP Top-up?

In line with your rising income

Every year, your income grows. Employers offer increments or a bonus that increases your salary or income. As you expect your income to grow over the years, investing more in an existing plan becomes a logical step towards building wealth. It can be efficiently invested as a top-up to a current SIP offering you good returns, and it auto adapts to increase savings to keep it in line with the rise in income.

 Reach your goals early

SIPs are designed to help investors to achieve long term financial ambitions. Besides, a top-up facility allows incremental investing at regular intervals, where wealth tends to compound, thereby helping to reach your financial goals faster and expand your plans to meet your current needs. Remember, even a small increase in investment via top-up SIP every year can also help you create a larger corpus for your goals than regular SIP investments.

 Fight inflation

Inflation is a serious concern that consistently erodes the value of your money in terms of an increase in the cost of living. SIP Top-up allows increasing contributions to stay in line with inflation and helps plan long-term financial goals.

 One plan, no hassle

Rise in income or a new source of earning needs to be invested systematically. But looking for new investment is not only tedious but also time-consuming. Instead, the best option is topping up an existing investment. The top-up facility helps increase the SIP installment automatically in the same scheme and folio as per the choice given by you while signing up the SIP Top-up form and thus provides relief from the hassle of managing multiple SIPs.

 Low current surplus, not a problem

SIP Top-up facilitates increasing investment with time if your initial investment surplus is low. Therefore you need not worry if the current surplus is low.

To conclude, you can always compare the estimated surplus you are likely to generate from SIP and top-up SIP. Top-up SIP, with greater return prospects, may help you deal with the future uncertainties better. Take the benefit of multi-dimensional SIP, particularly if you have an advisor to help make the investment decisions.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh / Enquire