Step Up SIP
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One option to invest in tax-saving mutual funds is through a systematic investment plan (SIP). Here, you consistently (weekly, monthly, or quarterly) invest a small amount according to your financial capacity. Simply take it a step further by including an automated mechanism that will raise your SIP contributions after a certain amount of time! Step-up SIP is also known as top-up SIP.
In simple terms, you are adding to your SIP on an annual basis by a specific amount, such as 5000 in 2015, 5000+15% in 2016, and so forth. This can be done in accordance with your current income, anticipated yearly increases, and of course, your financial objectives. This lays out a clear strategy for you (investor) to gradually accumulate the predetermined investment amount.
WHY TOP-UP YOUR SIP?
The main attraction about SIP is convenience. On the day of your salary, the payments might be automated. You can confidently predict a 10% increase in your income, therefore aim for a step-up figure of at least 5% to 7%. The force of compounding is at work here, and it will produce better returns, so increase your SIP with every annual bonus, rise, or increment. Additionally, market timing is irrelevant when investing in mutual funds via SIP over a long period of time. SEE THE IMAGE BELOW TO UNDERSTAND BETTER.
HOW TO CHOOSE STEP-UP SIP?
You have the option to select Step-up SIP on the online form. Contact us and we will fill in the appropriate columns with the initial amount, step-up amount, step-up frequency, and final amount. Most fund companies let you raise your investment amount once every six months or once a year.
DIFFERENCE BETWEEN STEP-UP SIPs AND CONVENTIONAL SIPs
Investors under the classic SIP model are not given the choice to increase their periodic contributions over the course of the investment. One must start a new SIP if they want to invest more money than they were able to do previously. Step-up SIP comes in quite handy in this situation because it enables consumers to transfer their higher earnings into their existing SIPs rather than opening a new account or simply spending the money. Step-up SIP investments, as we have already shown, have many advantages over normal SIP investments. This will guarantee that you continue to make the necessary funds to meet your financial objectives. Given all these factors, there is absolutely no need for you to put off taking your Step-up SIP.
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