SIP Top-Up Calculator: Systematic Investment Plans (SIPs) are a great way to invest to grow your wealth in the long term. People are investing a lot of money in Mutual Funds through SIP. In this, a fixed amount has to be invested every month which is invested in the mutual fund scheme. While this helps in reducing the risk from the portfolio in the long term, it also works for wealth creation. On the other hand, Top-Up SIP is also a facility available in mutual funds, through which investors can increase their existing SIP by some amount every year. This increase can either be some percentage of the SIP amount or it can also be a fixed amount. Taking top up as your income increases is a wise option.
Benefits of SIP top-up
Top Up SIP is an option through which you can increase the installments invested in SIP from time to time. Through this, the increase in the amount of investment can be some percent of the SIP amount or it can also be a fixed amount. That means, if you have started SIP with Rs 5000, then after 1 year you can add 10%, 20% or 25% or even more of Rs 5000; If you have topped up 10 percent, then after 1 year the amount deposited every month will be Rs 5500. If this option continues, next year 10 percent of Rs 5500 i.e. Rs 550 will be added and then the monthly investment will become Rs 6050. This sequence will continue further also.
How much will be the benefit, understand with example
40 year old Manish has opted for SIP of Rs 5,000 every month for the next 20 years for his daughter’s marriage. When he studied the return charts of equity mutual funds, he saw that there are many such funds which have consistently given returns of 12 to 15 percent or more during the last 15 to 20 years. Considering inflation, he has considered the estimated return on his investment to be 12 percent. At the same time, he decided that every year, whatever increase there is in income, he will invest 10 percent of it in SIP top up. Now its benefits can be understood through calculations.
Case-1: Regular SIP
Monthly SIP: Rs 5,000
Duration: 20 years
Estimated return: 12 percent
Total investment: Rs 12 lakh
SIP value after 20 years: Rs 49,95,740 (about Rs 50 lakh)
Profit: Rs 37,95,740 (about Rs 38 lakh)
Case-2: SIP Top-up
Initial monthly investment: Rs 5,000
Duration: 20 years
Estimated return: 12 percent
10% top up every 1 year
Total investment: Rs 34,36,500
SIP value after 20 years: Rs 99,44,358 (about Rs 1 crore) i.e. Rs 50 lakh more
Profit: Rs 65,07,858 (about 65 lakhs)
What do you get from top-up SIP?
In this calculation you can see that if you top up SIP, the total value of investment after 20 years will be around Rs 1 crore. Whereas the total investment made by you is around Rs 34.50 lakh. In this respect you got a profit of around Rs 65 lakh. Whereas in regular SIP, after 20 years you will get around Rs 50 lakh, which is around Rs 38 lakh more than the investment of Rs 12 lakh made by you. Secondly, if you have set a target of raising money for your daughter’s wedding, that target will be met before time.
,Note: We are not advising investment in mutual funds here. Here is an information based on SIP calculation. There are risks in the market, so consult an expert before investing.)
