Investors with a long-term investment horizon and goals can invest in mutual funds with a systematic investment plan (SIP).
In a normal SIP, an investor is required to choose a tenure. It is not possible to raise the contribution amount. Otherwise, a new SIP is required to be started or there is an option to put in lump sum money.
In such cases, step-up or top-up SIPs allow investors to automate their SIP contribution and increase it in proportion to the expected growth of income.
A top-up SIP allows investors to alter their SIP instalments by a fixed amount or percentage at predefined intervals.
Monthly contributions in an ongoing SIP can be suitably raised using a top-up facility.
A top-up SIP could also be known as SIP booster or SIP step-up facility, a few terms coined by various fund houses.
Investors get an opportunity to save in line with their earnings with a top-up SIP. Moreover, it helps contributors to beat inflation by raising the SIP payments by the rate of inflation or more and aiming to reach the desired financial goal earlier than expected.
However, it is pertinent to note that an investor has the choice of selecting the top-up option when they enroll for the SIP. After they have enrolled, they will not be able to alter their top-up information.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.