Top Up SIP: How Does Top Up Systematic Investment Plan Work? Explained

SIP Top-Up Calculator: Investing in Mutual Funds through Systematic Investment Plan (SIP) is very popular. Systematic Investment Plan (SIP) is a better way to invest to grow your wealth in the long term. In this, a fixed amount has to be invested every month which is invested in the mutual fund scheme. Top-Up SIP is also a facility available in mutual funds, through which you can increase your existing SIP by some amount every year. This increase can either be a few percent of the SIP amount or it can be a fixed amount. Advisors also advise that taking top up as your income increases is a wise option. As your financial condition improves or salary increases, you can increase the investment every year.

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This is a better way to invest to grow your wealth in the long term with less risk. Experts consider SIP as a safe means of investment, in which instead of blocking a lump sum amount, one gets the option of investing on a monthly basis. Therefore, if there is any kind of risk in the market, there is protection from it. In this, you can assess your investment from time to time and accordingly you can also take the option of SIP top up or SIP pause.

SIP top-up benefit: Calculation

This can be understood with an example. 35 year old Saurabh has opted for SIP of Rs 10,000 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 per cent or more in the last 15 to 20 years. Considering inflation, he has considered the estimated return on his investment to be 12 per cent. At the same time, he decided that every year, whatever increase there is in income, he will invest 10 per cent of it in SIP top up. Now its benefits can be understood through calculations.

Case-1: Regular SIP

Monthly SIP: Rs 10,000

Tenure: 20 years

Expected Return: 12 per cent

Total Investment: Rs 24 lakh

SIP Value after 20 years: Rs 99.91 lakh

Case-2: SIP Top-up

Initial Monthly Investment: Rs 10,000

Tenure: 20 years

Expected Returns: 12% 10

% every 1 year Top up: Rs 1000

Total Investment: Rs 68.73 lakh

SIP Value after 20 years: Rs 1.95 crore

Profit: Rs 1.27 crore

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 2 crore. Whereas the total investment made by you is around Rs 69 lakh. In this respect, you got a profit of around Rs 1.27 crore. Whereas in regular SIP, after 20 years you will get about Rs 1 crore, which is about Rs 76 lakh more than the investment of Rs 24 lakh made by you.

Secondly, if you have planned to raise Rs 1 crore for your daughter's marriage in 20 years, then your goal will be accomplished before time. If not, then after 20 years you will get double the fund from the target.

Wealth gain in regular SIP: Rs 76 lakh

Wealth gain in top up SIP: Rs 1.27 crore

(Disclaimer: The above article is based on SIP calculation for information purpose only, we are not advising investment in mutual funds here. There are risks in the market, consult an expert or investment professional before investing.)