The Magic of Top Up SIP : Has there been an annual increment in your salary recently? This annual increment can usually be 5 to 10 percent of the salary or even more. This means that the salary of those getting the increment must be increasing now or will increase. How do you see the money of this increment? Do you want to spend it only on your daily needs, or do you want to use it for financial planning for yourself? If you use this additional money properly, then in the long term you can create a big corpus with this 5 to 10 percent increment. For this, mutual fund SIP and top up in it every year is a better option.
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What is Top-up SIP?
Systematic Investment Plan (SIP) is a system of investing in mutual funds where instead of investing your money in a scheme at once, you invest on a monthly basis. For monthly investment, any minimum or any amount can be fixed under that scheme. On the other hand, increasing this amount by a fixed percentage every year is called top-up SIP.
For example, if you started investing with a monthly SIP of Rs 5,000 and Rs 5,000 was deposited in the scheme every month for 1 year. In the 13th month, you chose the option of increasing this amount by 10 percent for the entire year (13 to 24 months). In such a situation, from the 13th month, instead of Rs 5,000, Rs 5500 will be deposited monthly. Then in the 25th month, i.e. after completion of 2 years, you again increased the investment by 10 percent of Rs 5500. In top up SIP, such increase is done every year.
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Case-1 : SIP top-up for 10 years
Starting monthly SIP: Rs 5,000
Duration : 10 years
Estimated return: 12%
10% top up every 1 year
Total investment in 10 years: Rs 9,56,245
SIP value after 10 years: ₹16,87,163 (around Rs 17 lakh)
Total profit: Rs 7,30,918 (Rs 7.30 lakh)
Case-2 : SIP top-up for 15 years
Starting monthly SIP: Rs 5,000
Duration: 15 years
Estimated return: 12%
10% top up every 1 year
Total investment in 15 years: Rs 19,06,349
SIP value after 15 years: Rs 43,41,925 (around Rs 43.50 lakh)
Total profit: Rs 24,35,576 (Rs 24.35 lakh)
NPS: 40 lakh funds will come in hand as soon as you retire, along with 50 thousand rupees pension every month, save 100 rupees daily as soon as you get a job
Case-3 : SIP top-up for 20 years
Starting Monthly SIP: Rs 5000
Duration : 20 years
Estimated return: 12%
10% top up every 1 year
Total investment in 20 years: Rs 34,36,500
SIP value after 20 years: Rs 99,44,358 (around Rs 1 crore)
Total profit: Rs 65,07,858 (Rs 65 lakh)
Why do SIP top-up?
Usually, income also increases with time. If you keep taking out a small part of the increased income for investment, then after a certain age you can achieve many of your financial targets. Top up SIP is a better option for those who start investing slowly and want to increase their investment as their income increases. Both first-time and experienced investors can opt for step-up SIP.
(Note: We are not advising you to invest in mutual funds here. Here is some information based on the SIP calculator. There are risks in the market, so consult an expert before investing.)