About  TOP-UP SIP AND HOW it HELP?

About  TOP-UP SIP AND HOW it HELP?

A lot of investors use a Systematic Investment Plan ( SIP) as a tool to invest in mutual funds. But, as our income grows over time, you are likely to have more money available to invest over time. Did you know you can top- up your SIP as well?

What is a top-up SIP?

A Top-up SIP provides flexibility to your investment that allows you to bump-up your monthly investment amount.  It can be either a particular percentage of your original amount or a predetermined fixed amount.  Following are the top 4 reasons how a top-up SIP can prove to be quite useful:

  1. Adapts to your rising income– The amount you invest in an SIP at the start of your career is usually a small amount. Your income or salary is expected to increase every year. Employers offer increments or bonuses on an annual basis that can be invested as a top-up to an existing SIP investment.
    For example, Let’s assume you invest Rs5,000 in an SIP each month for 20 years for your retirement. You further decide to top-up the SIP by only Rs500, at an interval of every 6 months. Let’s assume the rate of returns at 12% p.a. Using an SIP calculator, the amount accumulated for your goal at the end of 20 years would be Rs50 Lakhs for SIP (without Top-up SIP). Had you considered to opt for top-up SIP the same amount would have grown to Rs1.11 Crore with top-up SIP, provided that the rate of return is constant.
  2. Helps reach financial goals faster– As you might know, SIPs are designed to aid you to reach your long-term financial goals. A top-up facility permits you to reach your financial ambition at a quicker pace or helps you to expand your goals to meet your financial needs.
  3. Fights the inflation monster – As an investor, inflation is your biggest enemy as it has the potential to hampers the returns on your mutual fund investments. As inflation steadily erodes the value of your assets, it may be wise to increase contributions to an investment plan for the long-term. A top-up SIP has the potential to account for inflations as it supports to keep up with the future cost of living.
  4. Allows you to keep investing in an existing plan rather than open a new one– Top-up facility saves you from the hassle of managing several SIPs. An unexpected new source of earnings or a sudden rise in income would need to be invested systematically. However, looking for a new investment opportunity is time-consuming and tedious. Instead, topping up an existing investment can prove to be the most efficient option. Thus, a top-up plan is an easy and hassle-free process.

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