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Top-up SIP

Top-up SIP - The way to Accelerated Wealth Building

Building wealth is a marathon, not a sprint. It requires consistency, patience, and sometimes an extra push, even when following a solid investment plan.  SIPs in mutual funds have become a popular choice that promotes consistency, patience, and discipline among investors. However, sometimes, just an SIP might not suffice. Sometimes, an extra push of a top-up SIP is required to accelerate your wealth-building journey.

What is Top-up SIP?

A top-up SIP allows investors to increase their SIP contribution by a predetermined amount at regular intervals. Moreover, as opposed to earlier, investors can now also add top-ups to their existing SIPs. This means that investors can start investing with an SIP amount of their comfort level, and as their conviction grows in mutual funds, they can also increase their SIP contribution. Let’s compare SIP with top-up SIP.

SIP vs Top-up SIP

An extension to the traditional concept of SIP, top-up SIP adds weight to the SIP giving it the power to fulfil financial needs at an accelerated pace. Let's look at this with the help of an example.

Top-up SIPs unlock the full potential of the compounding effect. As the investment amount increases gradually, the invested corpus grows exponentially. These additional contributions benefit from the same compounding effect, making your overall returns snowball over time. To calculate the returns you can receive through top-up SIP, visit the NJ Wealth SIP calculator.

SIP vs Top-up SIP


5 Benefits of Top-up SIP

  1. Accommodate Increasing Income

    The general human tendency is to seek instant gratification. Hence, with increasing income, the common notion would be to update the standard of living, but to sustain that lifestyle in the long term, it is important to boost your wealth-building journey. As you progress in your career and your income increases, an SIP may not be able to do justice to the amount you can save and invest for your financial future. A top-up SIP would allow you to park your increments and bonuses in a better manner by systematically adding a predefined amount to your SIP contribution, hence contributing to building a solid financial future.
  2. Fight inflation

    Inflation erodes the value of money with each passing year, hence decreasing your purchasing power. Essentially, this means that if you are not increasing your SIP amount with each passing year, you are technically investing less each year. For instance, an SIP of Rs 10,000 will be equivalent to approximately Rs 9,400 in the next year and Rs 8,900 in the year after (Assuming inflation at 6%). Hence, it is imperative to increase the value of your SIP by at least the rate of inflation to retain its value.
  3. Avoid additional research 

    With the option of top-up SIP, you can streamline your investment process by avoiding the hassle of managing multiple SIPs. This will not only save you time and effort in terms of research, but will also help you maintain a seamless investment strategy. Rather than starting a new SIP, you can directly top-up your existing SIP and follow a highly organised process of investing.
  4. Faster Fulfilment of Financial Needs

    The added weight of top-ups to SIP act as boosters helping in faster fulfilment of financial needs. For instance, if you started an SIP for your child’s education of Rs 15,000 in equity mutual funds, 15 years ago, then you could’ve built an estimated corpus of Rs 75.41 lakh* as of today. However, if you started this SIP 13 years ago, and topped it up by Rs 1,500 yearly, then you could’ve built an estimated corpus of Rs 80.93 lakh* as of today. This means, that through top-up SIP you can build a bigger corpus in less time, hence fulfilling your financial needs faster.
    (*Assuming investment in Equity Fund and an average return of 12.64% p.a. as per AMFI Best Practices. Guidelines Circular No. 135/BP/109/2023-24 dated November 01, 2023. Past performance may or may not be sustained in future and is not a guarantee of any future returns.)
  5. Inherent Benefits of SIP

    Since top-up SIP is an extension of SIP, it provides the inherent benefits of SIP, such as -
  • Power of compounding - The principle of compounding can be defined as ‘interest-on-interest’. Through periodic investments, you earn compounded returns on both the principal invested amount and the accumulated interest, which significantly contributes to increasing your returns. Starting early can further maximise the benefit of compounding.
  • Rupee-cost averaging - Equity markets are volatile in nature. However, when investment is made through SIP, one does not need to worry about market volatility. With SIPs, investors get the benefit of rupee-cost averaging. This means investors buy more units when markets are in bearish phase and less when markets are in bullish phase. Hence, the impact of market volatility gets minimsed through SIPs.
  • Discipline - SIPs are a great way to inculcate financial discipline. Through regular SIP contributions, investors get into the habit of saving and investing consistently. This helps avoid impulsive spending and maintain a disciplined approach towards building wealth in the long-term.
  • Automated investments - SIPs automate the investment process, deducting a predetermined amount from your bank account at set intervals and investing it in a chosen mutual fund scheme. Through this, you can effortlessly invest towards your financial needs and eliminate the need to remember to invest consistently.

To conclude, top-up SIP is an efficient tool to build wealth at an accelerated pace. By adding to the benefits of SIP, a top-up SIP amplifies the power of compounding. Moreover, the facility to top-up existing SIP has made parking extra money easier than ever. A top-up SIP is a great tool not only to fulfil financial needs faster but also to build more wealth, as compared to SIP in a stipulated time frame. Choose top-up SIP to boost your wealth-building journey! Contact your mutual fund distributor for more details.