Whats is Top-up SIP & How to Do SIP Top Up

Say, you start investing in a Systematic Investment Plan (SIP) every month to build a healthy retirement corpus. To your delight, 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.

Wondering how to increase SIP amount in mutual funds? Keep reading.

What is Top-Up SIP meaning?

Mutual funds offer SIP top-up facility, wherein the monthly SIP instalment can increase by a fixed percentage or amount after a certain interval.

For instance, a mutual fund might offer you a top-up facility where the SIP investment increases by 12% every 12 months. This is an excellent way to increase and streamline your savings with an increase in your income. As the SIP amount keeps increasing, so does the overall investment corpus.

Benefits of SIP top-up

Here are the key benefits of considering SIP top-up-

1. Align SIP with your income

Planning your SIP top-up in line with an increase in your income will help you grow your investment in the long term as you don’t have to change the proportion of your investment.

2. Manage inflation better

SIP top-up can help you keep up with inflation by allowing you to top-up your SIP amount by a fixed percentage that is higher than the average inflation rate. For instance, if the average inflation rate is 7.5% in India, you can top-up your SIP amount by 7.5% or more to tackle inflation.

3. Achieve financial goals faster

SIP top-up might help you reach your financial goals faster than regular SIPs as regular increase in SIP investment may help you achieve the total corpus sooner.

Things to consider before doing SIP with Top-Up

• The top-up amount is predefined over a fixed period. As defined by your scheme, it could either be a percentage of the existing amount or multiples of a minimum amount.
• The frequency cap is typically half-yearly or yearly.
• You can set the upper limit for top-up capping, either in terms of the month, year, or amount, after which the top-up facility will stop.
• Once you sign up for this facility, there’s no turning back. If, down the line, you cannot afford to pay the periodic increases, the only option is to cancel the plan and start afresh.

Additional Read: Why are SIPs an Ideal Choice for the First-time Investor?

How to increase mutual fund SIP amount

• First, check with your mutual fund house if it offers a mutual fund top-up facility.
• Do remember that a lot of mutual fund houses grant you the option of a top-up at the time of opening a new SIP. So, in case you don’t get such an option midway, you can start a new scheme and apply for a top-up before you pay your first instalment.
• All mutual fund houses have a standard application form and an SIP form. In the latter, fill in your basic scheme details and opt for a top-up option found at the bottom of the page.
• You must also give an application to your bank asking them to transfer the increased amount to the mutual fund house, in case you had opted for payment automation.

A few tips to keep in mind

• 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 and without any cost of acquisition of mutual fundunits.
• Avoid using the top-up facility as a tactical strategy to gain from falls in the equity market. The strategy may not work efficiently as a top-up is allowed once every six months or a year, depending upon the mutual fund.

Additional Read: Timed lump sums vs SIPs: What works better?

Bottom Line

Want to explore mutual funds that match your custom investment goals? Browse through Tata Capital’s MoneyFy SIP app! You can use the MF scanner to pick your investment type, get a detailed comparison of mutual funds, and choose those that align with your investment objectives, risk profile, and other requirements. Take the effortless route to MF investing today.

FAQs

How do I add another amount to my SIP?

You can increase your SIP amount by opting for a top-up facility. Under this facility, the monthly SIP amount increases by a fixed percentage after a specific period. 

Is SIP top-up good?

SIP top-up is beneficial as it allows you to increase your investment amount as your income grows, helping you accumulate a larger corpus over time and maximise returns.

What is a top-up SIP calculator?

A top-up SIP calculator helps you estimate the future value of your investments by adjusting for periodic SIP increases. It shows how increasing SIP contributions can enhance your long-term returns.