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Tuesday, October 26, 2021

Top Up SIP Vs SIP: How Top Up SIP Works? Understand its advantages with calculus

SIP Top-Up Calculator: Top-Up SIP is also a facility available in mutual funds, through which you can increase your existing SIP every year.

SIP Top-Up Calculator: Investing in Mutual Fund through Systematic Investment Plan (SIP) is very popular. Through SIP, you can invest a fixed amount every month instead of a lump sum investment in a mutual fund scheme. At the same time, Top-Up SIP is also a facility available in mutual funds, through which you can increase your existing SIP every year. This increase can be either a percentage of the amount of SIP or it can be a fixed amount.

Understand by example

Suppose you invest 5000 rupees every month in the mutual fund SIP scheme you have just selected. If your salary increases next year, then the capacity of your investment increases. In this case you can opt for SIP top-up. On completion of one year, you can increase that amount on the basis of increase in your income. This increase can be 10 percent or 20 percent of anything every year. If you increase 10 percent next year, then you will have to invest 5500 rupees every month from the second year. Similarly, the amount will increase after every year. This facility is provided by almost all mutual fund houses. But they may have different rules. For example, SBI Mutual Fund allows SIP to be increased only in the ratio of 500 rupees.

Better returns at less risk

It is a better investment method to increase your wealth in the long term with less risk. Experts consider SIP as a safe way of investment, in which instead of blocking a lump sum, there is an option to invest on a monthly basis. Therefore, if there is any kind of risk in the market, then it has been protected.

Better than regular SIP

Case-1: Regular SIP

Monthly SIP: Rs 10,000
Duration: 20 years
Estimated Return: 12%
Total investment: Rs 24 lakhs
SIP value after 20 years: Rs 49.91 lakh
Benefit: Rs 25.91 lakh

Case-2: SIP Top-up

Initial Monthly Investment: Rs 10,000
Duration: 20 years
Estimated Return: 12%
10% top up every 1 year: Rs 1000
Total investment: Rs 68.73 lakh
SIP value after 20 years: 1.99 crores
Benefit: Rs 1.30 crore

It is clear here that if SIPs are topped up, then during 20 years, an investment of about Rs 44.5 lakhs is more than the regular SIP. But after 20 years, there will be a difference of about 1 crore in value. In a regular SIP of Rs 10,000, you will get 99.91 lakhs after 20 years. At the same time, 1.99 crore rupees in SIP top.

(Note: We are not suggesting investing in mutual funds here. Here is an information based on SIP calculator. There are risks in the market, so consult the expert before investing.)

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Nisha Chawlahttps://www.businesskhabar.com/
She is an expert in Banking, Finance and working with an international bank. She sharing her ideas and knowledge with Business Khabar.
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