A Systematic Investment Plan or commonly known as SIP is an excellent approach for your long-term or short-term financial goals. It is a tool that allows you to invest in a mutual fund scheme over a period of time. It can be weekly, monthly, quarterly or semi-annually. While you may start small, you could top up your SIP by a minimum of 5 to 7 percent every year, which will help you reap higher returns in a simplified manner. However, it is important to track the market and economy, inflationary trends, review your own lifestyle and spends as well as your future goals.
How To Increase SIP Amount?
There are no rules regarding increasing the SIP amount. First of all, review your existing portfolio to see which funds are performing as per the goals you had set. You may accordingly explore the possibility of further investment in an existing fund through the step-up SIP feature that is expected to fare well in the long term. Another way is to start a fresh SIP in a new fund. For the step-up/top-up feature, let’s say you are currently investing Rs. 10,000 in a fund per month. You can either increase the amount every year by Rs. 1000 or 2000 or the other option is to have a fixed percentage which is around 10 to 20 percent addition to your existing SIP every year.
SIP With Annual Increase
There are simple calculators available online which tell you the exact corpus that you will have at the end of the year based on your investments.
Can We Increase SIP Amount In Between?
Yes, you can absolutely increase or decrease the SIP amount; however, you will need to first cancel the existing mandate and give a revised one for the fund that you have chosen. There is no penalty charged for this. Let’s give you an example. If you have invested Rs. 2000 per month in a particular Equity Mutual Fund and continued investing for two years; now you want to add more money to that SIP. As mentioned above, you can opt for the SIP top-up which allows you to increase the amount either through pre-defined percentage or a specific amount at regular intervals either quarterly or annually. You also have the option of introducing a new fund to your existing SIP portfolio and investing the additional money there.
How Much SIP Should I Do?
An investment or saving is defined by a person’s individual financial goals. This will include buying a car or house, children’s education, retirement, lifestyle and of course an emergency corpus. However, most of the tax/investment experts and MF calculators will tell you that one should use around 15 to 20 percent of their salary to invest in SIPs. After keeping aside some funds for emergency or basic household expenses, you need to ensure that the SIP amount that you have planned will help you get enough corpus to realize your financial goal. The best part is that our income levels don’t remain the same. On an average, there will be an increment of 10 to 15 percent every year in your salary.
This means that if we start saving even 10 percent of our income, our investment will also go up every year. So you may start small in an SIP, but you can consistently increase the investment without impacting your other existing finances.
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