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Top-up Systematic Investment Plans are a safe and profitable investment option for employed individuals.
In this era of rising inflation, saving alone isn't enough to improve your financial situation; choosing a safe and profitable investment option is also crucial. There are many mutual fund investment options available these days. For working professionals, the "Top-Up SIP," or Systematic Investment Plan, is considered the most beneficial and safest. Financial advisor Faisal Hashmi explains the important points to keep in mind before investing in this plan:
What is Systematic Investment Plan?
A "top-up SIP" investment plan is slightly different from a standard SIP. Typically, a fixed amount is deposited monthly, quarterly, semi-annually, or annually. A top-up SIP plan is designed to benefit working individuals. For example, if a person is employed, their salary is expected to increase at least once a year.
In such a situation, the individual can increase their profits by increasing their SIP installments with a portion of their increased salary. This feature offered under SIP is called a "top-up SIP plan." The top-up option is already available in the standard SIP plan form, and selecting it initiates the individual's top-up SIP plan.
How to benefit from Systematic Investment Plan?
If a person increases the installments in their top-up SIP, even slightly, their profits naturally increase. For example, if a person deposits $500 per month in a SIP, then at an estimated return of approximately 12%, they will receive $2400 after 10 years. However, if the same person increases their investment by 10% every year in a top-up SIP, they will receive approximately $4000 over the next 10 years, almost double the amount compared to a standard SIP. Under this scheme, an increase of just 10% each year can double an investor's total funds. There is also an option to easily stop or restart the SIP at any time.
Beneficial even in market fluctuations
The biggest advantage of investing in a SIP is that you can continue investing during both bearish and bullish market conditions. Even if you invest during a downturn, the investor benefits because the average cost of purchases decreases. Therefore, whether the market is bullish or bearish, SIP plans provide investors with benefits. This is an excellent investment option for middle-class working individuals.
Some important things to keep in mind
Check past performance: Generally, mutual fund companies offer the option of investing in debt and equity funds, but before selecting any scheme, make sure to assess its performance for the last 5 years.
Assess your budget and expenses: Before starting SIP investment, assess your family's needs and potential major expenses, only then decide the investment amount.
Bank Instructions and ECS: In this type of investment, a fixed amount is deducted from your savings account and deposited into your investment account via ECS on a monthly basis. If your plan offers annual increments, be sure to inform your bank so that the incremental amount is regularly transferred via ECS.
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