How do I modify my existing SIP?

Nutan Gupta

11 May 2017

New Page 1

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.

Have Referral Code?

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Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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How do I modify my existing SIP?

Nutan Gupta

11 May 2017

New Page 1

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.

Have Referral Code?