Investing is not a one-time or a simple process. It is an ongoing activity, requiring patience to yield higher returns. You need to make the right investment decisions after evaluating all variables to ensure maximum benefits.
Your financial goals during life change constantly. Therefore, it is important that you need to review your investments on a regular basis to ensure it is in line with your changing requirements.
You may invest in mutual funds to enjoy capital appreciation over a long-term period. Even if you do not have a high lump sum to invest, you may opt for a Systematic Investment Plan (SIP).
A SIP allows you to invest a smaller amount in funds of your choice at regular intervals. The biggest advantage of a SIP is the rupee cost averaging. Rupee cost averaging means that when the Net Asset Value (NAV) of the fund is lower, you are able to acquire more units. On the other hand, if the NAV is high, you are able to accumulate lesser units. Another advantage is the power of compounding. You are able to enjoy capital appreciation through smaller periodic investments over a longer period.
You may increase the amount invested in the SIP as per your choice and convenience. It is recommended you top-up your SIP investment over the years as your income increases. A top-up is also advisable to combat the constantly rising rate of inflation and ensure you are able to achieve your financial goals.
What is SIP top-up?
As your income rises, you have a higher amount of surplus funds. This money may be invested in your existing SIP through a top-up. Under this facility, you are able to increase the SIP installment amount by a certain amount invested at periodic intervals. This provides you flexibility and the possibility to build greater wealth over the long-term.
Here are some points you need to remember while opting for the top-up facility.
You may top-up the existing amount only by a certain amount, which is generally INR 500 or in multiples thereof. Furthermore, it is available through Electronic Clearing System (ECS) or direct debit only.
You will have to submit an application form to top-up your SIP investment. Usually, it takes about one month for the top-up to become effective after you submit the form. In case you want to go for additional top-ups, you will have to wait for a certain pre-specified period before making the second request.
Now that you understand what top-up of your SIP means, here are three benefits of choosing this option.
In a top-up SIP facility, you start with a smaller investment amount. Over the years, the amount is gradually increased to a higher sum. Therefore, you have the flexibility of investing an amount that is comfortable to you without facing any financial difficulties or liquidity crunches.
- Beats inflation
You may have calculated a huge corpus that is required later in life to achieve financial stability. Although it may seem horrendously huge today, with a top-up SIP, it is easily achievable. The SIP top-up feature allows you to earn higher returns, which are sufficiently able to beat inflation. If you do not choose a top-up, the value of your savings is eroded over the long-term due to the rising rate of inflation.
- Builds wealth
The type and the top-up amount are based on certain factors such as age, balance investment years, and your financial objectives. Your age is an important factor because the longer investment years left, the more wealth you are able to build. The power of compounding plays an important role in wealth accumulation. With compounding, your earnings are reinvested to earn greater income. Over the long-term, this power enables you to build a good corpus that may be used to meet your financial objectives.
You may invest in a SIP online directly through the mutual fund’s website. Alternatively, you may submit an application form to the nearest branch. Stepping-up your SIP installment over the years is very advantageous. You are able to build wealth by the contribution of gradually increasing installments that do not cause any financial difficulty.
SIP is beneficial in developing investment discipline. You compulsorily save a certain amount in the funds of your choice at periodic intervals. You may increase the installment by a certain amount as your income increases allowing you to accumulate greater wealth.
If you are not investing, invest in a SIP online today and build your corpus.