How do I modify my existing SIP?

How do I modify my existing SIP?

by Nutan Gupta Last Updated: Dec 10, 2022 - 10:30 am 193.7k Views

Investing in a Systematic Investment Plan (SIP) is considered to be most favorable as you can invest as low as Rs. 500 in it. This makes it affordable for almost everyone, even those who have recently started working. But is this enough? Inflation rises every year and hence, it is only fair that you increase the amount you invest.

Instead of having your money just lying idle in your savings bank account, you can invest it in Systematic Investment Plan (SIP). This would facilitate the habit of regular saving and also earn you interest.

Doing a SIP top-up

When you get a hike in your work or you have surplus money flowing in, it’s best to invest it. Channelizing your money in mutual fund can be a good option to invest and earn some good profits on it. However, the risk with investing lump-sum is that you might have to time the market. Hence, it is advised to invest in SIPs instead. SIPs offer steady monthly investments and you don’t have to time the market for it. You can increase the amount you invest in SIPs and get better returns on it.

Can top-up be done in an existing SIP?

Ideally, this may not be possible. You fill an Electronic Clearing System (ECS) mandate form when you apply for a new SIP. According to this mandate, you tell your bank to transfer a fixed amount on a fixed day towards your SIP investment every month. Since you have already submitted this mandate to the bank, you may not be able to change it now. Most fund houses also do not allow this change yet.

Is there a way out?

Yes, definitely. You can apply for a top-up at the time of applying for an SIP. While taking a new SIP, you can opt for a periodic top-up of your investment amount. Mutual fund houses allow you to increase your investment amount either every six months or on a yearly basis if you wish to. This, however, should be specified at the start.

How does the periodic top-up work? (IG content)

  • You start investing with Rs. 500 per month.

  • And ask for a yearly top-up of Rs. 500 in your investment amount.

  • After the first year, your SIP amount will go up to Rs. 1,000 per month.

  • After the second year, it would increase to Rs. 1,500 per month.

  • This keeps increasing till the tenure of your SIP.

  • You can stop this by canceling your SIP and starting a new one.

To sum it up

You can top-up your SIP if you specify in the mandate in the start of your investment. You need to choose the amount and frequency of your top-up. Mutual Fund houses prefer the top-up of minimum Rs. 500 onwards. You can check with your SIP distributor if there is any option to modify your existing scheme. Or, you can stop this and start a new one with the mandate to top-up your investment at regular intervals.

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