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SIP Top-Up: The Mindboggling math of SIP top up
Systematic Investment Plan (SIP) stands as a robust tool in the aim for building wealth over long term, encouraging investors to commit a fixed amount each month. This disciplined approach fosters a habit of consistent investing. However, as income grows over time, the regular SIP instalment may lose significance relative to an individual’s overall income and wealth. To address this concern and expedite the journey toward financial goals, investors can leverage the SIP top-up facility.
What Is SIP Top-Up facility?
SIP Top-Up facility allows investors to periodically increase their SIP investment amount, either by percentage of the existing SIP instalment or an absolute amount. SIP top-up ensures that investments keep pace with evolving financial circumstances.
Benefits of SIP Top-Up
- Seamless Increment
With SIP Top-Up, you don’t need to open new SIP accounts. It saves you from managing multiple plans. Instead, you keep increasing in your existing SIP amount.
- Adapts to Rising Income
As your salary increases, so can your SIP. Gradually ramp up your investment amount without any hassle.
- Faster Goal Achievement
SIP Top-Up helps you reach your financial goals faster. By increasing your investment, you can harness the power of compounding effectively.
- Stay Ahead of inflation
Inflation erodes the purchasing power of money. SIP Top-Up ensures that your investments keep pace with rising costs.
Tip: Ensure to register One Time Mandate which permit debit of the increased amount from your bank
Normal SIP vs SIP Top-Up (In Equity category) - The Mindboggling math of SIP top up
Returns calculated by taking mean of 10-year rolling returns between 01/06/13 and 30/05/23 for BSE Sensex, CAGR of 12.64% i.e. 0.0968% monthly return. Past performance may or may not be sustained in future and is not a guarantee of any future returns.
Topping up / increasing a Rs. 10,000 SIP by just 10% every year increases the corpus at the end of 30 years by 2.56 times.
Conclusion A top up facility helps you accelerate your target corpus accumulation. A SIP Top Up plan also helps you strike the right balance between discipline and flexibility. By adapting your investment plan to your changing circumstances, you can achieve your financial goals sooner.
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