With the SIP Fill-In, even a little extra can make a huge difference to your wealth accumulation plans and enable you to reach your goals faster.

Almost everything comes with a top-up these days. If you look at your data plan, there are additional facilities for everything from a home loan to personal loans. You can now take advantage of the option to top up and get more money while your income remains the same. Likewise, insurance policies also offer additional plans. But did you know that you can also boost your mutual fund’s Systematic Investment Plans (SIPs) through top-ups?

To put it in perspective, Additional SIP enables you to increase the amount of mutual fund investment that you contribute each month to the fund. It is a flexible option and depends on a certain percentage of your choice or even a certain amount of the original SIP.

Normally, when you invest a certain amount of money each month with a long-term SIP, you take advantage of the potential for long-term wealth accumulation. When you charge your SIP, you choose to increase your SIP premium amount to try to achieve your financial goals faster.

Let’s understand this with an example.

Let’s say you start a monthly SIP of Rs 20,000 for 20 years at an assumed rate of return of 11% over the time frame.

This SIP amount has the potential to build a pool of around Rs 1.75 crore on an assumed interest rate of 11% against your investment of Rs 48 lakh.

With your income rising, you have now decided to increase your monthly SIP amount by 10%.

This decision can help you build a pool around Rs 2.82 crore on your investment of Rs 93.60. This means that increasing or increasing your monthly SIP by just 10% each year can give you an additional pool potential of Rs 1 crore.

Let’s take a look at how a regular SIP differs from a SIP plan with top-up facilities. In the table below, you will see that the possibility of obtaining a larger amount with a SIP is much higher than with a regular SIP in the same time frame.

Now let’s talk about how you can increase your SIP.

How the top-up program can work for you

  1. Increase income, increase the amount of SIP. The amount you invest depends on your income. Perhaps at the beginning of your career, your SIP investments may be much smaller. But an increase, whether through an annual bonus or a raise, can enable you to use the additional money as an addition to your existing SIP. The additional SIP program maintains a consolidated investment. It provides you the option to slowly improve the SIP amount to accumulate wealth faster.
  1. Accelerate your financial goals. A small increase in your SIP investment, no matter how small, can be beneficial. If you are looking to reach your goals faster, increasing your investment or increasing your existing SIP plan can be an ideal option.
  1. Helps beat inflation. When it comes to your investments, inflation can be a beast. This is because, with each passing year, the rate of inflation continues to rise and is constantly eroding the value of your money. So, to keep pace with inflation, you may want to contribute a larger amount to your long-term investment plan. In this regard, additional SIP can be an excellent option to keep pace with inflation. By periodically and regularly increasing your investment amount, you may be able to keep up with the cost of living in the future.
  1. It’s simple and easy. Starting a SIP for each target can be tedious, especially if you have to track, monitor and manage multiple SIPs. Perhaps you do not have time to study a new investment opportunity. Therefore, adding a SIP to your existing SIP can be a convenient option.

What you need to know before adding your SIP

  • When registering with a SIP facility, remember to choose the top up option.
  • Almost every AMC allows a minimum increment amount of Rs 500 and in multiples of Rs 500. Some AMCs also allow you to increase a set percentage each year.
  • After registering with SIP, you may not be able to modify the details. If you wish to make any revisions, you must discontinue your existing SIP and start a new SIP with the option to top up.
  • In general, every SIP offers a top-up option.
  • When utilizing the SIP top-up option, you do not need to fill out individual ECS debit authorizations.

Most investors believe that creating wealth requires a large amount of money. But with SIP investing, you have a chance to grow your money over time. Plus, with SIP, even a little extra can make a huge difference to your wealth accumulation plans and enable you to reach your goals faster.

(By Renjith RG, Associate Director, Geojit Financial Services)

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