Investing in mutual funds: A Systematic Investment Plan (SIP) in mutual funds is one of the effective ways of creating wealth for investors who have long-term goals. SIP is an easy way of contributing a fixed amount at a fixed frequency in mutual funds, where investors can make the best of the market’s highs and lows through Rupee cost averaging of acquisition costs known as NAV.
Sometimes, when investors have surplus money to invest, experts ask them to increase the SIP amount in mutual funds they are already investing in. Here comes a SIP Top-up, which allows investors to increase the SIP amount they are investing annually. Such a facility enhances the flexibility of the investor to invest higher amounts during the tenure of the SIP. These facilities are also known as SIP Booster or SIP step-up facilities.
Under a normal SIP, investors cannot increase their contribution during their SIP tenure. For more investment, they have to opt for a fresh scheme. Whereas, Top-up SIPs or SIP boosters allow customers to automate their SIP contribution and increase it in line with their expected growth of income.
How does it work
By opting for a top-up facility of mutual funds, investors can increase their monthly contributions in an ongoing SIP. Like, if an investor is already investing Rs 10,000 in an equity MP scheme, and wishes to invest more. He can opt for Sip top-up and add his desired amount at the end of each fiscal/calendar year or a financial year or every six months.
Advantages of having top-up SIP
Helps you reach your financial goals faster: With this facility, one can start investing more at a time and can accumulate the goal target amount sooner than the expected time frame.
Top-up SIP facility also helps you fight rising inflation. With rising inflation, the value of money keeps going down. A smart way of getting the most out of this situation is by raising the SIP contributions equivalent to the inflation rate or more.
Top-up SIP works in an auto pilot mode, which means it saves the investors from the hassles of opening new SIP accounts every time they want to increase their SIP contribution. If your scheme is giving handsome returns, a top-up SIP helps you increase the SIP amount in the same scheme, giving you more profit.