ETMarkets explains: SIP top-up in investing

By Indiatimes12 days ago

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Many investors top up SIPs in line with the respective increase in yearly income.

What does an SIP top-up facility mean?SIP top-up is a facility wherein an investor who has enrolled for SIP has an option to increase the amount of her/his SIP instalment by a fixed amount or percentage at predefined intervals. This increase can be linked to future income and growth.

What is the difference between conventional sip and sip top-up?In a normal or conventional SIP, investors cannot increase their contribution during their SIP tenure. If they want to increase it, they have to start a fresh SIP or make lump sum investments. Step-up SIPs allow investors to automate their SIP contribution and increase in line with their expected growth of income.

How does it work?Using a top-up facility, an investor can increase monthly contribution in an ongoing SIP. For instance, if you invest `10,000 every month in an SIP and wish to add `1,000 every month, at the end of each fiscal/calendar year or financial year or every six months, you can use the top-up facility.

While some fund houses call it top-up, some others call it SIP Booster or SIP step-up facility. Most prominent fund houses offer this facility to investors.

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