Accelerate your Wealth with SIP Top-up
By Akhil Chugh
Date July 23, 2023
As you embark on your journey towards financial prosperity, you may have encountered the term SIP (Systematic Investment Plan) as a popular investment option. SIPs have gained widespread popularity due to their simplicity, regularity, and ability to average out market volatility. But did you know that there’s an even better way to supercharge your investment? Enter SIP Top-up – an advanced and more dynamic version of traditional SIPs that offers numerous advantages for investors seeking accelerated wealth creation.
Say, you start investing in a Systematic Investment Plan (SIP) every month to build a sufficient retirement corpus. To your surprise, you get a decent salary hike or make some extra income and wish to invest the additional amount instead of spending it every month. Now, a conventional option would be to start a fresh Systematic Investment Plan.
Thankfully, top-up or step-up facilities are available to let you increase your investment contribution with an increase in income. This way, you can fully leverage the power of the compounding effect.
Let’s learn what is SIP top-up & its benefits in detail.
How does SIP Top-up work?
The SIP Top-up amount can be either a specific percentage of your original SIP amount or even a predetermined fixed amount. The frequency of increasing the amount is typically half-yearly or annual.
Let us assume that you have a monthly SIP of Rs 50,000 in a mutual fund scheme. If you opt for a Rs 5,000 SIP top-up on an annual basis, your monthly SIP installments will be Rs 55,000 after one year and Rs 60,000 in the following year & so on. After 15 years, with traditional SIP you will be able to accumulate Rs 2.5 crores. However, with SIP Top-up of Rs 5000 annually you will be able to accumulate almost double the amount of wealth i.e. Rs 4.8 crores.
Thus, under the step-up SIP scheme, your SIP amount would increase by a specified amount yearly, allowing you to increase your investments over time. You can also specify a maximum SIP amount, which would serve as the maximum limit to which the SIP would increase over time. When the increased SIP reaches the maximum specified amount, no more increase would be affected, and your investments would continue at the maximum amount.
A top-up facility lets the investor accelerate the timeline to reach the target corpus.
How SIP Top-up is better than SIP?
SIP (Systematic Investment Plan) Top-up is a powerful enhancement of traditional SIPs that offers several advantages, making it a preferred choice for many investors seeking superior wealth accumulation. Here’s why SIP Top-up is better than regular SIP:
1. Flexibility in Investment Amount:
Regular SIPs require a fixed investment amount at regular intervals, which might not align with changing financial circumstances. SIP Top-up offers the flexibility to increase your investment periodically, allowing you to capitalize on income growth and market opportunities. This dynamic approach ensures your investments stay in sync with your evolving financial goals.
2. Seizing Market Opportunities:
SIP Top-up empowers you to make the most of market fluctuations. By increasing your investment amount during market downturns, you can buy more units at lower prices. As the markets recover and grow, you benefit from a potentially higher return on investment. This ability to take advantage of market opportunities can significantly enhance your overall portfolio performance.
3. Customization for Specific Goals:
Each investor has unique financial goals, and SIP Top-up caters to individual needs. Whether you’re saving for a dream vacation, funding your child’s education, or building a retirement corpus, you can adjust your Top-up amount accordingly. This customization ensures that your investments align precisely with your specific objectives.
4. Accelerated Wealth Accumulation:
SIP Top-up turbocharges your wealth-building journey. By increasing your investment amounts over time, you harness the power of compounding, leading to accelerated growth in your portfolio. The incremental investments act as catalysts, propelling you towards achieving your financial milestones faster.
5. Disciplined Saving Habits:
Both SIP and SIP Top-up encourage disciplined saving habits, but SIP Top-up takes it a step further. With automated increments, you stay committed to your investment strategy, even during hectic times. This consistency paves the way for a systematic and organized approach to wealth creation.
6. Maximizing Long-term Returns:
As your income and financial goals expand, so can your investments with SIP Top-up. This not only diversifies your investment portfolio but also maximizes long-term returns. The ability to adapt to changing circumstances allows you to stay on track toward financial success.
Key Takeaways from Net Brokers:
- The investor has to opt for the Top-up SIP option while enrolling in the SIP facility.
- It is a smart saving solution if you want to create a higher corpus for your life’s goals.
- New investors can choose step-up SIPs to start investing an affordable amount in mutual funds initially and then gradually increase their investments as their income and knowledge grows.
- The top-up facility works best when you use it to build allocation for a preferred asset class over time. This way, you can reach your desired asset allocation levels quickly.
- Net Brokers believes that top-up SIP can help your investments match your income, beat inflation, and reach your goals sooner with lesser operational hassles. Thus, it helps you stay flexible and regular with your investments at the same time.
By making informed choices and staying committed to your investment plan, you can embark on a rewarding journey towards financial freedom with SIP Top-up as your potent ally.
For more information, get in touch with us today! Download our mutual fund app & start investing for your long-term financial goals.