Grow your capital and enjoy higher savings with mutual fund SIP top-up
Last Updated : July 29, 2016, 6:32 a.m.
Systematic Investment Plan (SIP) is a popular medium to invest in mutual funds, which are a large pool of money collected from different investors and dispersed around different securities such as stocks, bonds, money market instruments to diversify the risk element from the investment. Through SIP, you can invest a fixed amount each month for the period you want to. You can start investing in SIPs with amount as low as Rs 500. With low investment, chances are that you may not get the desired returns on your investment. So, while taking SIP, make sure you opt for top up facility as well so that you can enhance more savings by contributing a little extra.
Operational Methodology
SIP Top-up facility allows investors, who have enrolled for SIP, to raise the amount of SIP by a fixed sum at pre-defined intervals. So, you have got the flexibility to invest a higher amount during the term of your SIP. You can get the frequency of top-up on monthly SIP at the interval of 6 months and a year and quarterly SIP at 1-year interval. If the top-up frequency is not mentioned under monthly SIP, then it is taken as yearly interval. You can start with a minimum top up of Rs 500 and in the multiples of Rs 500 afterward. Let us understand SIP top-up facility more clearly in the tables below.
SIP without Top-Up Feature
| Year | Monthly SIP Investment | Total SIP Amount for the Year |
|---|---|---|
| 1st year | Rs 3,000 | Rs 36,000 |
| 2nd year | Rs 3,000 | Rs 36,000 |
| 3rd year | Rs 3,000 | Rs 36,000 |
| Total= Rs 1,08,000 |
SIP with top-up feature
| Year | Monthly SIP Investment | Total SIP Amount for the Year |
|---|---|---|
| 1st year | Rs 5,000 | Rs 60,000 |
| 2nd year | Rs 5,000 | Rs 60,000 |
| 3rd year | Rs 5,000 | Rs 60,000 |
| Total= Rs 1,80,000 |
From the tables, it is clear how SIP top up feature appreciates your capital and the savings. With slight increase in investment by Rs 2,000 on an yearly basis, your savings are raised by 60 per cent.
Benefits
- SIP top-up allows capital appreciation and thus widens the possibility of increased returns on your investment.
- Many a times we look to take advantage of the rise in our income by taking another SIP. But with the top-up plan, you can increase your contribution amount without having to subscribe for a fresh SIP.
- Your savings enhance greatly because of SIP top up.
- With this service, the paper work is eliminated.
- The top-up feature reduces the requirement to track multiple SIPs in the scheme.
How to apply?
If you are new to mutual fund SIP, then you will have to enroll for this facility while applying for SIP through a form designed especially for this purpose. You can select your preference for frequency and amount of top-up. Existing investors are required to apply for SIP with top-up facility along with ECS only. They must ensure the correct entry of details like scheme, date of starting the SIP top up, frequency and duration of SIP top-up. ECS will be set twice one for initial SIP amount and the other one for top-up value.
Prominent SIP top-up providers
- HDFC Mutual Fund
- ICICI Prudential Asset Management Co. Ltd.
- Birla Sun Life Asset Management
- DSP BlackRock Investment Management Pvt. Ltd.
- Tata Mutual Fund
- Sundaram Mutual Fund
Now that you have got the information about SIP top-up plan, you can thus take a right call on the same. Before fixing the top-up amount, make sure it does not hit your pocket too much.