Top 3 Reasons Why You Should Use SIP Top Up Facility

Systematic Investment Plans (SIPs) are an effective way to invest your savings to create wealth in the long term. This is because SIPs allow you to invest a fixed amount every month and take advantage of rupee cost averaging. 

With SIPs, you invest the same amount irrespective of the market volatility. This ensures that you buy more units when the markets are low and fewer units when they are high. Thus, you bring down your average cost per unit over the long term. No wonder countless Indians choose to invest through SIPs! 

Now, let us say that you have an existing SIP and your salary increases. You have surplus money available, and you wish to invest it through SIPs. At this point, you can either start a new SIP or opt for a SIP top-up facility. 

A top-up facility allows you to increase your SIP amount annually. So why should you go for a top-up and not start a new SIP? Here are some reasons why! 

Additional Read - How to Top up Your SIP?

It keeps you safe against inflation

Inflation erodes the overall value of your money. So, when you raise your SIP investment at the same pace as the inflation rates, you can protect your money's worth.

So, if the current average inflation is 7.5%, you can choose to top up your SIP by 10%.  

It is convenient to set up

Just like SIPs, top-ups work automatically. This feature saves you from the hassles of opening new SIP accounts every time you wish to increase your SIP instalment. 

Managing multiple SIP accounts can be cumbersome. So, it is wise to use a top-up to increase your SIP amount in the same scheme and folio.

Moreover, you have the option to cap your top-up amount. A SIP top-up cap means that once your total SIP instalment reaches a fixed pre-defined amount, it will remain constant till the end of SIP tenure.

You can reach your financial goals faster

You must have started your mutual fund investments with a goal in mind. As you increase your SIP investments every year, you can accumulate greater returns.

Therefore, you can achieve your goal amount sooner than the projected date.  

SIP top-up benefits

A SIP top-up allows you to gradually increase your investment contributions over time and potentially earn higher returns through the power of compounding. This helps you accumulate wealth faster and reach your financial goals sooner. It is also an excellent way to grow your investment in line with inflation, ensuring you can meet future financial goals comfortably.

Moreover, with the top-up feature, you can simply increase your investment without starting a new SIP and manage your investment effectively in a single place. You can also increase the SIP amount at a comfortable pace as your income increases without straining your savings or monthly budget.

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

Summary

The top-up facility in an SIP is an excellent way to grow your investments as your income increases. Instead of starting a new SIP, you can simply increase the contributions in the existing one and reach your financial goals sooner.

Frequently asked questions

1. What is the major benefit of SIP?

The major benefit of an SIP is that it allows you to invest regularly in a diversified portfolio and build significant wealth over time.

2. Can I top-up my existing SIP?

Yes, you can top-up your existing SIP to increase your contributions and grow your investment in line with your increasing income.

3. What is the difference between SIP and SIP top-up?

A SIP allows you to invest a fixed amount in a mutual fund at regular intervals. A SIP top-up is a facility offered by most mutual funds to gradually increase your contributions over time as your income increases. It helps you boost your investments and achieve your financial goals sooner.