The systematic investment plan (SIP) is a tool that helps you build a portfolio in mutual funds through regular contributions. This is a tried and tested route for accumulating large sums by contributing small capital doses. But a same amount of SIP cannot work especially when needs, inflation, and income all are rising for an investor. Here come the SIP topup SIP booster. A flexibility to increase your SIP input value without filling new forms or stopping previous SIPs.
Let’s learn how SIP Top-up or SIP Booster helps
Top-up SIP is a facility whereby an investor has an option to increase the amount of the SIP Installment by a fixed amount at pre-defined intervals. This will enhance the flexibility of the investor to invest higher amounts during the tenure of the SIP. Normally the top up starts after the 6th month.
This video from IDFC MF explains SIP Top Up in a very easy way.
https://www.youtube.com/watch?v=IA1Uqm7RM6w
This is the difference between a normal running SIP and a SIP topup/ SIP booster
This helps in:
- Useful when the current surplus is low – Investors with an initial low surplus for investment can use the SIP top-up facility to gradually invest more to achieve goals.
- Autoroute to increase savings – This feature works on autopilot to increase savings in sync with the rise in income.
- Achieve goals faster – With incremental investing, wealth grows faster with the help of compounding, thereby helping investors to attain goals faster.
- Convenience – It helps investors avoid the paperwork associated with increasing SIP contribution during the tenure.
- Maintenance – It reduces the necessity for creating and tracking multiple SIPs in the same scheme.
Lets us see how it works:
- The SIP top up can be availed in the same form when you sign up for the SIP. There is an additional column where you fill the Top-up amount, time of typing up like annually or six monthly.
- The top-up amount can be fixed (like Rs 500 or in multiple of 500) or in percentage like 10% of base SIP amount). Both are different options and can help in increasing your regular SIP amount. Let’s see how these 2 options
- The Top-up details cannot be modified once enrolled. In order to make any changes, the Investor must cancel the existing SIP and enroll for a fresh SIP with a Top-up
Here is an interesting infographic for SIP Booster/Top-Up facility
Should you go for a Half Yearly or Yearly Booster
Why would you plan to increase your investment every six months? One can understand the logic of increasing it every year to coincide with salary increments. But six monthly is just a feature and no benefits over it can be traced.
SIP Top-Up in Rising Market
In a rising market top up increase your exposure to the fund irrespective of where the market is headed. The market could be moving up and you could be increasing exposure or it could be moving downwards.
Unlike other SIP flexible features which seek to buy more units when the market is going down and less when the market is moving upwards, this one ignores that aspect. The focus is on increasing the SIP over time.
Details of other FLEXIBLE OPTIONS for SIPs are here.
Hope you liked this information and plan your SIPs. The best way to face future changes is to CHANGE.
Do share your thoughts on this and do not forget to share this article.
