Here is why you must consider increasing your SIP investments!
Systematic investment plans (SIPs) are popular among Indians because you can invest in your preferred mutual fund monthly. SIP is convenient for working professionals as you could start investing a small sum while beginning your professional journey. With every subsequent salary hike, you can increase your investment amount. This facility is known as the top-up or step-up SIP facility.
What is step-up SIP?
The step-up SIP facility helps you increase your investment amount over time. Increase your SIP contributions with every salary hike. If you begin your investment journey at ₹1000, you could increase your investment amount according to your choice next year. Stepping up your monthly mutual fund contributions will help you reach your financial goals quicker. New and experienced investors can take the help of the step-up SIP facility. Plan your investments according to your income and expenses if you sign up for the top-up facility. Your returns grow with every SIP investment. You can use a step up SIP calculator to verify if your returns grow with the step-up option.
Here is how you can step up your SIP investments:
- Use a SIP calculator step up for using determining the step-up SIP investment amount
- Sign up for the step-up SIP option and the period for increasing the investment amount
- Specify the maximum investment amount
What are the benefits of the step-up SIP option?
Listed below are a few advantages associated with the step-up SIP facility:
Synchronises investment and income growth
This facility helps you keep the momentum of your financial growth going. Step-up SIPs can assist you in growing your wealth by increasing your SIP base amount. Even a 10% annual increase can positively impact your mutual fund investment returns.
Reach your financial goals faster
Annually increasing your SIP investments can help you accumulate high returns. Hence, you can achieve your financial goals sooner than the projected date, i.e., the date you would’ve achieved your goal without opting for the step-up SIP facility. You can check it using an online sip calculator with a step-up option.
The power of compounding
The benefit of compounding is one of the salient benefits of SIPs. In compounding, the annually earned interest is reinvested. This multiplier advantage is a popular advantage of SIPs. Annually topping up your investments reward you by generating higher returns. You can check the benefits of compounding with the help of a sip step-up calculator.
Serves as a cushion against inflation
Inflation devalues the overall value of your money’s purchasing power. You can protect your savings by raising your monthly SIP investment amount at the same value as the inflation rate.
What are the things to consider before stepping up your SIP?
Here are a few things you must check before increasing your monthly SIP investment amount:
- Opt for the SIP top-up option during the registration for your SIP scheme. Look up if your SIP offers a top-up facility.
- Almost all AMCs require that your top-up amount is approximately ₹500, and the subsequent step-up amounts must be multiples of ₹500. Look for an AMC that also allows you to increase your investment amount annually as a percentage.
- You can’t modify your top-up preferences after registering. To make any changes, you must stop the existing SIP and start a new one with a top-up option.
The step-up SIP facility can help you accumulate high returns in the future. It can also help you reach your financial goals quicker than SIP. However, please determine the value of the step-up investment. A step-up SIP calculator can help you ascertain the step-up investment amount.