When it comes to investing in mutual funds, Systematic Investment Plans (SIPs) have long been a favourite among investors. They offer the ease of regular investments, the discipline of saving, and the potential for long-term wealth creation. But have you heard about Top Up SIP?
What is a Regular SIP?
A regular SIP allows you to invest a fixed amount of money in a mutual fund scheme at regular intervals— e.g. monthly, quarterly, or even weekly. This consistency helps you benefit from rupee cost averaging and compounding of principle invested & potential returns over time. For many, this is the go-to investment method because it’s simple, flexible, and manageable.
However, a fixed investment amount has its limitations. Over time, your income may grow, or your financial goals may expand. Sticking to the same SIP amount might not align with your changing needs or the rising cost of achieving your goals.
Enter Top Up SIP
A Top Up SIP, sometimes called a Step-Up SIP, builds on the foundation of a regular SIP. It enables you to increase your SIP contributions at predetermined intervals. For instance, you might start with ₹5,000 per month and top it up by ₹1,000 every year. This incremental approach ensures that your investment scales up as your income grows and you reach your goals faster.
Consider two investors, A and B. Both invest in the same mutual fund with an annualised return of 8% and 10% through SIP and Step Up SIP respectively, for 10 years with ₹10,000 per month.
When the returns are at 8%:
Investor A invests ₹10,000 through regular SIP for 10 years at 8% returns.
(Source: Mutual Fund Sahi Hai Calculator)
Total investment: ₹12.00 Lacs
Estimated future value of the investment: ₹18.29 Lacs
Now, investor B invests ₹10,000 through top up SIP, with a top up of ₹1,000 per year, for 10 years at 8% returns
(Source: Mutual Fund Sahi Hai Calculator)
Total investment: ₹19.12 Lacs
Estimated future value of the investment: ₹27.58 Lacs
When the returns are at 10%:
(Source: Mutual Fund Sahi Hai Calculator)
Total investment: ₹12.00 Lacs
Estimated future value of the investment: ₹20.48 Lacs
Now, investor B invests ₹10,000 through top up SIP, with a top up of ₹1,000 per year, for 10 years at 10% returns.
(Source: Mutual Fund Sahi Hai Calculator)
Total investment: ₹19.12 Lacs
Estimated future value of the investment: ₹30.46 Lacs
Who Should Choose What?
If you’re just starting out and prefer a no-fuss approach, a regular SIP might be sufficient to get your foot in the door of mutual fund investing. It’s particularly suitable for those with tight budgets or fixed income or those who lack discipline.
On the other hand, if you anticipate steady growth in your income or are serious about long-term wealth creation, a Top Up SIP is your ally. It adapts to your financial situation, helping you reach bigger goals without feeling the pinch.
While both regular SIPs and Top Up SIPs can help you achieve your financial goals, the latter clearly offers a more dynamic and flexible approach to wealth creation. It’s the one of the ideal choices for those who want their investments to evolve alongside their income and ambitions.
Choosing between the two ultimately comes down to your financial capacity, goals, and how disciplined you are about revisiting your investment strategy. But if aiming to maximize returns and reaching your goal faster is your priority, the Top Up SIP is a clear winner.
Ready to take your SIP game to the next level? A Top Up SIP might just be the push your portfolio needs.
Disclaimers:
- An Investor education and Awareness initiative by Tata Mutual Fund
- To know more about KYC documentation requirements and procedure for change of address, phone number, bank details etc., please visit: https://www.tatamutualfund.com/deshkarenivesh
- Please deal only with registered Mutual Funds, details of which can be verified on the SEBI website under ‘Intermediaries / Market infrastructure institutions.
- All complaints regarding Tata Mutual Fund may be directed to service@tataamc.com and / or https://scores.sebi.gov.in/ (SEBI SCORES portal) and or / https://smartodr.in/login
- Nomination is advisable for all folios opened by an individual, especially with sole holding as it facilitates an easy transmission process.
- This communication is a part of investor education and awareness initiative of Tata Mutual Fund
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
