Step-up SIP is a Effective method for maximizing compounding’s benefits Since it helps investors to gradually increase their original investment as their income rises.
Investors can reduce the impact of market volatility on their portfolio and gain over time from the power of compounding by gradually increasing their investment amount.
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What is Step Up SIP?
As the name suggests Step-up SIP ( popularly known as top up SIP ), is a facility by which one can increase SIP Contribution at a predetermined time interval. And this SIP top up happens automatically.
Step Up SIP can add wonders to a long term investor, who wants to increase investments with time.
Let’s take an example of Bestii Singh, suppose Bestii starts with a monthly SIP contribution of Rs 5000 and opt Step-up SIP strategy.
Singh opts for Step up SIP and increases his contribution by a fixed percentage (e.g.10%) every year for 5 years.
So In the first year, Bestii will invest Rs. 5000 per month, in the second year Rs 5500, in the third year Rs 6050, and so on.
Or otherwise Bestii can invest 5000 per month and increase it by rupees term such as 1/2/3/5/7/10 thousand or any other amount.
Let’s say Bestii start with a SIP of 5000 and opt to top up by 2000 every year. So, his SIP will increase to 7000 in next year and 9000 in subsequent year and so on.( image below )
One can also make Top up and opt for periodic increase in rupees terms also.
WHY should you opt for Top Up SIP /Step up SIP?
- Step Up SIP is a simple yet effective way of investing.
- It helps you to build greater wealth with time.
- With time our income increases but we forget to increase our investment. Nothing to bother! It is an automated process.
- We tend to accumulate larger wealth without our notice.
Difference between normal SIP and step up SIP
The main difference between a normal SIP and a step-up SIP is that the investment amount in a normal SIP remains constant over the investment horizon, while in a step-up SIP, the investment amount increases at regular intervals.
In a normal SIP, the investor invests a fixed amount of money at regular intervals (e.g., monthly, quarterly, or annually) for a specific period. The investment amount remains the same throughout the investment period, and the investor does not change the amount of investment.
On the other hand, in a step-up SIP, the investor has the option to increase the investment amount at regular intervals (e.g., annually or bi-annually) for a specific period. The investment amount increases over time, and the investor benefits from the power of compounding as they invest more money over time.
The key benefit of a step-up SIP is that it enables investors to gradually increase their investment amount, which can help them take advantage of market volatility and boost their long-term returns.
Investors can ensure that their assets remain relevant in the ever-changing economic climate by raising their investment amount and keeping up with inflation.
How to set up a Step up SIP
Here are the steps you can follow to set up a step-up SIP:
- Choose a mutual fund
- Decide initial SIP amount
- Decide step up amount ( the amount by which you want to increase your SIP each year, semi annually)
- Fill SIP Form or do it online
- Opt for ( tick/select) Top up option
- Submit application form
- Monitor your investment
It’s crucial to remember that you should speak with a financial advisor before establishing a step-up SIP.
This will ensure whether it is an appropriate investment plan for your unique financial position and investing goals.
Is step up SIP better than SIP?
Big corpus achievement looks a daunting task to every investor but thankfully Step up SIp can do this for you.
You can increase your corpus multifold just by simply increasing your SIP contribution year on year by a minor percentage or amount.
You can do it on a yearly basis manually too. But due to uncertain reasons we may fail to do so.
Thus a handy solution is step up/top up SIP Facility.
How can I add money to an existing SIP?/
Can I change SIP amount?
To change SIP amount in existing SIP, you need to start a fresh SIP in same or different funds. You cannot increase SIP amount in an already purchased SIP, However you can always start a new one in the same fund.
Start Your SIP- Step by Step Procedure to start SIP
Or otherwise you can stop your existing SIP and start a new SIP with increased or decreased amount.
If you wish to add bulk payment ( one time) in existing SIP then you can simply make an additional purchase. This additional purchase can be done any number of times.
Can I add more money to existing mutual funds?
Yes, you can add more money to existing mutual funds. Just like you add more money to your savings account, you can add money to your existing mutual fund too.
To do this, Just make a additional purchase request in SAME FOLIO.
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