Regular SIP Vs Top-Up SIP

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‘Mutual Fund Sahi Hai’ campaign initiated by AMFI has played a large role in making SIP and mutual funds a popular thing. Usually, people consider SIP and mutual as equivalent. But that’s not true. SIP is a mutual fund investment method to generate long-term wealth. SIP are of various kinds. But Top up SIP or Top Up SIP is a SIP variant which is quite popular nowadays. Let’s explain Regular SIP and Top Up SIP briefly.

Regular SIP

Regular SIP or SIP stands for Systematic Investment Plan which allows investors to invest a certain amount of money in a mutual fund scheme after a certain period of time. SIP helps in developing a disciplined saving habit. You can easily invest in a mutual fund via SIP with a minimum of Rs. 500 which is quite pocket-friendly. SIP benefits you with the compounding power. Using SIP, you need not to have to worry about the falling market. You can buy more fund units when the market is falling because SIP enables rupee cost averaging.

Top Up SIP

Top Up SIP commonly known as Step Up SIP is another variant of SIP. Using the Top Up SIP, you can increase your SIP amount at a regular interval after an increase in your income. Top Up SIP helps in increasing the invested amount which will add up to the initial principal amount. To use the Top up SIP or Step up SIP, you can choose either fixed or Top-up cap amount and a CAP year. The Top-up amount that you can choose is a minimum of Rs. 500 and its multiples. Step Up SIP helps in reaching a financial goal faster than regular SIP.

Comparing Regular SIP and Top Up SIP

  • Monthly contribution in mutual fund through Regular SIP remains constant throughout the SIP tenure. But your monthly income will change with time. So, using Top Up SIP, you can increase your SIP amount every year based on pre-set instruction.
  • Regular SIP helps in building wealth for the long-term. But using Top Up SIP, you can reach your investment goal and build wealth more quickly than a regular SIP.
  • Regular SIP helps in inculcating a disciplined investment habit. But Top up or Step Up SIP helps in inculcating the habit of higher investments.
  • When there is an increase in your income, you tend to spend more as the monthly amount for regular SIP is fixed. But with Step Up SIP, you keep control on your spending by investing an increased SIP amount through Top Up SIP.
  • Regular SIP tends to save less than a Top Up SIP or Step Up SIP.
  • When you want to increase your SIP amount, you can do it easily with the same SIP account through Top Up SIP.
  • To cope up with the changing lifestyle and related expenses, Top Up SIP is much more beneficial than regular SIP.
  • Regular SIP generates a higher wealth ratio than Step Up SIP. This is because, with Step Up SIP, the increased SIP amount is compounding for a lesser time period. 

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