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Friday, April 12 2019
Source/Contribution by : NJ Publications

Today mutual fund SIPs have become very popular. With growing financial awareness, more and more persons are today investing in equity markets through the mutual fund SIP route. To those who do not know, SIP stands for Systematic Investment Plan which helps you to invest a fixed amount at periodic intervals (daily, monthly, quarterly) over a period of time in your chosen mutual fund scheme/fund.

However, it has been found that while investors open to starting SIPs, it becomes slightly difficult when it comes to increasing the SIP amount by cutting down on your expenses. That is something people are not really doing today. Another challenge after starting the SIP is to repeatedly increase the SIP amount. People tend to not increase this amount for many years altogether. We have to realise that due to inflation, the real value of money decreasing. This effectively means that you are saving less tomorrow than today with a stagnant SIP value where it should be increasing with your income levels. By not reviewing and increasing your SIP from time to time and investing below potential, you are loosing heavily on the wealth creation opportunity. We will see this lost opportunity later in the article.

As a solution to the problem of stagnant SIP amount is Top-up SIP. SIP Top-up is a facility wherein an investor who has enrolled for SIP, has an option to increase the amount of the SIP Instalment by a fixed amount at pre-defined intervals. Thus, this facility enhances the flexibility of the investor to invest higher amounts during the tenure of the SIP. The Top-Up SIP can be registered at the time of starting a SIP itself. Thus, you may choose to increase the SIP periodically, say half-yearly or yearly frequency, by any amount. This will automatically increase your SIP amount at the set frequency without you having to do anything further. The Top-up is like your commitment today for increased savings tomorrow which we as investors would be more comfortable promising today.

Let us now look at an example for the difference that SIP Top-Up makes in the wealth creation journey of an investor. Please note that this example is for illustration purpose only.

Scenario [A]

Mutual Fund SIP per month Rs.10,000, fixed during entire period
Assumed Rate of Return 12% yearly
Period of Investment 30 years
Total Amount Invested Rs.36 lakhs
Investment Value at the end of 30 years Rs.3.08 Crores

In this scenario, a normal SIP is taken with any Top-up facility. As we can see, the projected wealth is 3.08 Crores.

Scenario [B]

Mutual Fund SIP per month Rs.10,000, increased by 10% every year.
Assumed Rate of Return 12% yearly
Period of Investment 30 years
Total Amount Invested Rs.1.97 Crores
Investment Value at the end of 30 years Rs.7.99 Crores
Incremental Corpus due to Top-Up Rs.4.91 Crores

In this scenario, the investor increases his SIP amount by 10% every year over the previous year amount. We can see, the total amount saved is nearly Rs.8 crores, which is higher than original SIP corpus by over Rs.4.9 crores. The incremental benefit due to Top-up is in fact higher than the base SIP investment itself.

Why Top-up?

The reasons for having a SIP Top-up facility on your base SIP should be now very clear to everyone. Here are the key pointers to summarise the same.....

  • Increase your savings along with increase in the income levels
  • Sustain/increase your 'real value' savings due to inflation
  • Reduce unnecessary spendings due to income raise due to committed increase in savings
  • Achieve challenging /big financial goals and/or reach financial goals faster
  • Operationally easy and simple


We would highly recommend that you choose the SIP Top-up facility while starting any new SIP. If you already have an existing SIP, you are not too late and you can speak with your financial advisor to guide you in availing this facility.

Imp.Note: We are registered NJ Wealth Partners and this interview published is sourced from NJ Wealth with due permissions. Reproduction of this interview/article/content in any form or medium by any means without prior written permissions of NJ India Invest Pvt. Ltd. is strictly prohibited.