Mutual fund top-up increases your investment in SIP every month and due to this your returns also increase.
You must have heard about data plan to insurance top-up but do you know about mutual fund top-up. Mutual fund top-ups can increase your returns manifold and help you reach your financial goals faster. After all, how does this top-up increase the returns of investing in mutual funds through SIP? To understand this it is important to know how it works
This is how top-up increases your income
Mutual fund top-up increases your investment in SIP every month and due to this your returns also increase. It is up to you to decide how much additional amount you add to your existing SIP. When you invest a specific amount in a mutual fund through a long term SIP, compounding builds up a large amount in the long run. This helps you to achieve your financial goal. It can be well understood with an example.
Suppose you invest 20 thousand rupees every month through SIP for 20 years assuming that it will give 11 percent return. After 20 years, after a return of 11 per cent, you will get Rs 1.75 crore. That is, you invest Rs 48 lakh and you get Rs 1.75 crore. Meanwhile your income grows and you invest an additional 10 per cent more. With this, with an additional ten percent investment every month, your investment becomes Rs 93.60 lakh and you get Rs 2.82 crore. This means that if you top-up only 10 percent, then you get such a high amount.
Do not forget to take top-up option while investing in SIP
Whenever you take a SIP, do not forget to choose the top-up option. Nowadays every AMC offers top-up option for a minimum of Rs.50 0 and multiples thereof. However, after choosing a top-up SIP, you cannot change it. But to make changes, you will have to finish the existing SIP and get a new SIP with top-up. By the way, with every SIP these days a top-up plan is attached. Therefore, while investing in mutual funds, definitely choose a top-up plan. This will help you meet your financial goals faster and get better returns.
(Article: Ranjith RG)
(The author is Associate Director, Geojit Financial Services)
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