You can change the mutual fund SIP amount on a periodic basis

SIPs can now periodically change the amount based on some preset rule

Srikanth Meenakshi
Updated19 Oct 2018, 01:14 PM IST
Increasing your SIP periodically helps to save more. Photo: iStock
Increasing your SIP periodically helps to save more. Photo: iStock

I plan to start an SIP from next month. While registering online, I was asked if I’d like to select the top-up option. When I get a salary hike, is it advisable to top-up the current SIP or start a new one?

—Vidhi Kumari

SIPs have traditionally referred to a steady investment of the same amount of money on a particular date every month. For example, one would invest 5,000 evenly split between two mutual fund schemes on the 5th of every month for, say, 10 years. However, these days, there have been many changes to this rather static notion of SIP thanks to the advent of digital platforms as well as AMCs adopting digital means of transactions. As a result, SIPs do not need to be for a particular tenure. Another change is the one that you have indicated—SIPs can now periodically change the amount based on some preset rule. These are called step-up SIPs, and some platforms call them top-up options. Regardless of the name, what it means is the ability to change (increase) the amount of SIP on a periodic basis by a fixed amount. For example, if one is running a 3,000 SIP in a particular fund, they can set it up so that the SIP amount increases by 1,000 every year. This way, the SIP becomes one of 4,000 in the second year, 5,000 in the third year, and so on. For salaried professionals, who can reasonably count on a pay raise every year, this method empowers them to automatically increase their SIP every time their ability to save goes up.

When you have a well-diversified portfolio that gets reviewed once a year, there is no need to keep adding new funds to the portfolio (new SIPs) just because you are adding to the amount that you are investing. You can simply add to the existing portfolio. On the other hand, if you start with a simple one-scheme portfolio as a beginner, up until the point that you have a well-diversified portfolio, I would recommend that you build out the portfolio before adding more money to the same single fund.

To read more queries, go to livemint.com/askmintmoney

Srikanth Meenakshi is co-founder and chief operating officer, FundsIndia.com. Queries and views at mintmoney@livemint.com

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
First Published:19 Oct 2018, 01:14 PM IST
Homemoneyask-mint-moneyYou can change the mutual fund SIP amount on a periodic basis

Most Active Stocks

Bharat Electronics

324.00
03:59 PM | 5 JUL 2024
6.65 (2.1%)

Oil & Natural Gas Corporation

288.20
03:59 PM | 5 JUL 2024
11.15 (4.02%)

Tata Steel

174.75
03:58 PM | 5 JUL 2024
-1.5 (-0.85%)

HDFC Bank

1,648.10
03:55 PM | 5 JUL 2024
-78.5 (-4.55%)
More Active Stocks

Market Snapshot

  • Top Gainers
  • Top Losers
  • 52 Week High

Raymond

3,226.70
03:55 PM | 5 JUL 2024
284.8 (9.68%)

B E M L

5,066.20
03:54 PM | 5 JUL 2024
412.35 (8.86%)

HBL Power Systems

569.80
03:59 PM | 5 JUL 2024
39.9 (7.53%)

The New India Assurance Company

273.75
03:56 PM | 5 JUL 2024
17.85 (6.98%)
More from Top Gainers

Recommended For You

    More Recommendations

    Gold Prices

    • 24K
    • 22K
    Bangalore
    74,020.00-73.00
    Chennai
    74,819.0072.00
    Delhi
    74,529.00-435.00
    Kolkata
    74,819.00-218.00

    Fuel Price

    • Petrol
    • Diesel
    Bangalore
    102.86/L0.00
    Chennai
    100.92/L0.17
    Kolkata
    104.95/L0.00
    New Delhi
    94.72/L0.00
    OPEN IN APP
    HomeMarketsCibilPremiumMint Shorts