What is SIP?
The Systematic Investment Plan or SIP helps you achieve your future goal by building wealth. In a Systematic Investment Plan, you invest a fixed amount of mutual funds step by step, monthly, or quarterly over a period of time. SIP allows you to buy a fixed amount to a given date so that you can execute a saving plan for yourself.
You don’t need to time the market according to its highs and lows in SIP. Rather than timing the market, investing every month will ensure that you have invested at the market’s highs and lows; due to this, you can ensure the best return from it.
What is top up SIP?
Some fund houses call it SIP top up; some calls it SIP booster or SIP step up facility. As you grow your career over a period of time, you have more money to invest. SIP top up allows you to increase your investment plan continuously. You can understand SIP top ups as a percentage or a fixed amount you can save every year.
Every investor who has a SIP plan has an option to increase their SIP plan by a fixed amount with a definite time interval. It can be a fixed amount from your original SIP, or you can invest a predetermined amount as a top up SIP.
How does SIP top up work?
If you use the SIP top up facility, you can increase the investment amount in your ongoing SIP. So if you are investing Rs.10,000 per month and want to add an extra Rs.1000 every month, you can use the SIP top up facility at the end of every year or every six months.
What are the benefits of Top up SIP plan?
The key benefits of SIP top up plans are as follows:
- You don’t need new plans to increase your investment: It will save you from tiring management of different SIP accounts. The SIP top up allows you to keep investing in your existing plan. You don’t need other plants to increase your investments. If you have a sudden rise in income or an increment in your salary, you don’t need to invest your time to find another good investment option. Simply opt for the SIP top up. It will give you ample return without tedious or time-consuming searching for a new investment option.
- Adapts to rising income: You suppose to have an increment in your salary every year. So, you can increase your investment as a top up in your existing SIP. It gives you an option to increase your SIP top up amount gradually.
- It helps you to reach your financial goal faster: The SIP top up will help you to meet your goal faster. You can expect financial increments every year, and investing in an existing SIP is a wise idea to grow your wealth. Because SIPs are designed in a manner to help you to achieve your long-term financial goals.
- Helps fight inflation: Inflation is your biggest enemy when it comes to investment. Many investors choose to increase their contribution to stay in line with inflation. The average rate of inflation from 1960-2021 has been 7.5%. As inflation consistently erodes the value of your money, it may be prudent to raise a contribution for a long-term investment plan.
What is the difference between SIP and SIP top up?
The difference between normal and top up SIP is clearly visible with the return. The normal SIP contributor can not increase their investment during a SIP tenure. If they want to grow, they have to start a fresh SIP. Whether top up SIP allows you to automate your SIP contribution and increase in line with your expected increment.
The annual income growth can help you to achieve your financial goals faster. So, why get stuck with the same amount of investment throughout your life when you can earn a massive surplus with the help of a small amount as a SIP top up.
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