What is the SIP top-up (step-up) facility?

A systematic investment plan (SIP) allows you to put a fixed sum of money every month in a mutual fund. But most of us get a raise in our salaries every year. This means we can afford to increase our investments. But how do you do that in a SIP that is already going on? Enter top-up or step-up facility. It is important that as your income grows, the quantum of investment should grow too.

How wealth is created under SIP top-up plan?

Hence, you can see that by increasing your SIP by 10% each month, you will create wealth which is twice as much as your investment amount. This is how SIP top-up helps you generate wealth faster.

Decide on the amount you want to increase your SIP by, or by the percentage of increase. You can also cap your amount in case you think you won't be able to afford a monthly investment beyond a point. For instance, in our example above, a 5% annual increase would mean you would need to invest Rs11,790 every month in the 10th year and Rs30,580 in the 20th (final) year. Once your monthly installment hits the ceiling, your top-up facility stops and then you keep investing that same amount for the rest of your SIP tenure.

Wealth Cafe Actionable - Where you are a salaried individual, ensure that you do a SIP  top-up based on your regular increment in your salary amount.