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Reasons Why You Should Use SIP Top Up Facility

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 lesser 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 meansthat 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.   

Things to consider before investing

  • You have to select the SIP top-up option while registering for your SIP scheme. So, check if your scheme offers a top-up facility. 
  • Most AMCs require that your top-up amount should be at least Rs. 500, and must be in multiples of Rs. 500. However, some AMCs also allow a percentage increase annually.
  • Once you register, you cannot modify your top-up preferences later. If you want to make any changes, you will have to stop the existing SIP and start a new SIP with a top-up option.

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

How to invest? 

A top-up can protect you against inflation and help you reach your goals faster. So, add a top-up to your existing SIP scheme and maximize your returns. 

Want to start a SIP but don't know how? Let Tata Capital's Moneyfy app help you. Just set your goal and assess your risk profile, and you will receive mutual fund schemes tailored for you!

So, download the app, complete the online KYC, and become investment-ready. 

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