Investment Plan
Nilesh Pujari, Tax Consultant
Systematic investment plan is an investment plan in mutual fund through which you invest your money every month instead of investing all at once. If the monthly investment is increased every year, it is called top up or step up SIP. (Investment Plan)
E.g. Let's say you have started a SIP of ten thousand and you deposit ten thousand rupees every month for a year. After that, if you increase this amount by ten percent in the next year i.e. from 13 to 24 months, you will continue to deposit 11 thousand rupees monthly instead of 10 thousand from 13 to 24 months. After this, from 25 months to 36 months, if you increase it again by ten percent, the amount of SIP will be Rs. 12,100. Accordingly, the SIP amount will increase by ten percent every year. (Investment Plan)
Investment Plan: Calculation of 'Top Up' SIP
Let us understand the benefit of top up SIP with an example. Suresh, 35, opted for a SIP of 10,000 per month for the next 20 years for his daughter's marriage. He also decided to increase the SIP amount by ten percent every year. On the other hand, Mohan started a twenty year SIP. His amount was also ten thousand per month, but he did not opt ​​for step up SIP. He kept a normal SIP. Assume that both of them earned 12 percent annual return. Now let's see how much fund these two have accumulated after twenty years. (Investment Plan)
There is a difference between Top Up SIP and Regular SIP. 68,73,000 rupees invested in twenty years with SIP compounded at ten percent per annum. But assuming a 12 percent return, his fund accumulated a total of Rs.2 crores. That is a profit of Rs 1.30 crore. At the same time, after investing 24 lakhs through regular SIP, one crore rupees accumulated. That means a profit of 76 lakh rupees. Similarly, there is a difference of 71 percent in both the cases.
Why SIP Top Up?
Generally, the salary of the working class is increased every year. This makes it easy to increase the SIP amount; But most of the congregations are apathetic about increasing the SIP amount despite increasing the salary and continue to incur unnecessary expenses. Therefore, even investing in the long term does not get the expected benefit. You can easily exceed your financial goals if you consistently use the increased salary share to invest. Top up SIP is useful for people who want to increase their investment in stages. Both new and seasoned investors can opt for step up SIPs to accumulate large capital for long term.
Top up SIP is useful for people who want to increase their investment in stages. Both new and seasoned investors can opt for step up SIPs to accumulate large capital for long term.
