SIP-top up facility: What is it and how does it work? Should you opt for it while investing?
- SIP-top up facility: You can start investing in mutual funds through an SIP with an amount as low as ₹500, and can increase it gradually through SIP top-up
SIP-top up facility: Investing via Systematic Investment Plan (SIP) is considered to be one of the best ways to amass wealth keeping in view long-term horizon. Many retail investors utilise SIPs to achieve long-term financial objectives such as home ownership, children's education, marriage, or retirement. You can start investing in mutual funds through an SIP with an amount as low as ₹500, and can increase it gradually through SIP top-up.
What is SIP-top up?
A SIP top-up facility allows an investor to increase their SIP amount annually. This facility provides the investor an option to increase the amount of his/her SIP instalment by a specified amount or percentage at certain intervals.
Amit Gupta, MD, SAG Infotech said an investor can raise his or her monthly payment to an ongoing SIP by using a top-up service.
SIP-top up also known as SIP Booster or SIP step-up option
"Some fund companies refer to it as top-up, while others refer to it as SIP Booster or SIP step-up option. Most well-known investment firms provide this service to investors," said Amit Gupta,
Difference between normal SIP and SIP-top up
Manoj Kumar Dalmia, Founder and Director, Proficient equities Private limited said that in case of normal SIP's, investors are not given the choice to increase their contribution. They must start a new SIP or make a lump sum contribution if they want to raise it.
Investors have the option to automate SIP contributions and increase them in accordance with their anticipated rise in income thanks to top-up SIPs, he added.
Why do financial experts recommend SIP-top up facility
According to Amit Gupta, financial experts advise investors to use a top-up facility since it automatically compensates for inflation and handles revenue increases such as an annual salary raise. Most paid employees receive an annual raise, thus they recommend that investors refill their SIPs on a yearly basis. This is taken care of through the top-up facility.
“By guaranteeing that investors are saving in step with their income, a top-up SIP makes sure they can keep up with the monthly increases in income. It aids contributors in beating inflation and swiftly achieving their financial objectives,” said Manoj Kumar Dalmia.
How does it work?
For example, if you invest Rs10,000 per month in a SIP and want to add ₹1,000 per month, you can utilise the top-up facility at the conclusion of each fiscal/calendar year or financial year, or every six months.
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First Published:6 Dec 2022, 11:35 AM IST
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