SIP: Instead of Simple SIP, top-up SIP, money will grow at rocket speed… How? Understand this through calculation..

SIP is considered a very good option to secure the future. In the long run, you can add a lot of money through this. You must have also included SIP in your portfolio. Usually, people invest a fixed amount in SIP every month, but if you top-up the SIP, your money will grow very fast. Top-up in SIP works as a booster dose, in such a situation investors get much more benefit. Understand the point of your work with the calculation in the slides below.

What is top-up SIP?

Top-up SIP is a facility in which you can add some more amount to your regular SIP. It can be understood that you have chosen the option of a monthly SIP of Rs 2,000 at the beginning of your job. As your salary is increasing every year, you can top-up some amount in SIP every year accordingly.

Benefits of Top-up SIP
Top-up SIP helps in keeping pace with inflation and rising costs. It keeps you one step ahead in the era of rising inflation. By applying top-up from time to time, your investment in SIP increases, and this gives a good benefit of compounding because the magic of compound interest works best when there is more capital for it. Financial goals are achieved quickly through Top-up SIP.

How many funds will be added through Simple SIP in 15, 20, and 25 years?
If you start a Simple SIP of Rs 5,000 and run it for 15 years, then at an average return of 12 percent, you will get Rs 25,22,880. If you run SIP for 20 years, you will get Rs 49,95,740 and if you run SIP of Rs 5,000 for 25 years, you will get Rs 94,88,175 at the rate of 12%.

Understand how amazing Top-up SIP will do?

If you start SIP with Rs 5,000 and apply a top-up of 10% annually, then according to a 12% average return, you will get Rs 43,41,925 after 15 years. If you continue this investment for 20 years, then a fund of Rs 99,44,358 will be prepared and if you continue the investment for 25 years by doing a 10% top-up, then according to a 12% return, a fund of Rs 2,13,77,731 will be prepared.

The longer the SIP, the more the benefit

Now you must have understood how you can increase your fund rapidly by applying top-up in SIP. Since SIP gives a good benefit of compounding, the longer you run the SIP, the more benefit you will get and the bigger the fund you will create.

Also, understand this thing.

SIP is a market-linked scheme. Investment is made in mutual funds through this. In such a situation, you have to keep in mind that the return of SIP is also market-based. Meaning, the return cannot be guaranteed in this. However, experts believe that the average return of SIP in the long term is around 12 percent, based on which we have done this calculation. But this return can also be less or more depending on the market.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.