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Why Must You Boost Your SIP Every Year

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08 Aug 2023

Introduction

Are you aware that simply committing to a Systematic Investment Plan (SIP) is not enough? Many individuals forget to nurture their SIP investments, missing out on potential growth opportunities. 

Like in the real world, where even small actions can have transformative effects, this rings true for SIP investment as well. Dive deep into this blog to know why and how these seemingly minor steps can transform your financial journey.

What Does Boosting An SIP Mean?

Boosting SIP simply refers to increasing the amount you contribute to your mutual fund corpus on a monthly basis. The minimum investment required for SIP is Rs. 500. If you aim to accumulate substantial wealth in the long run, it is essential to consider increasing your contributions. 

For instance, let’s say you were investing Rs. 1500 for three years, and you receive a 20% hike in your income. Instead of spending the extra amount, a wiser approach would be to boost your existing SIP by committing the additional funds towards it. This strategy can have a positive impact on your financial growth over time.

Why Should You Boost SIP Annually?

When you boost your SIP, you tend to experience the following benefits: 

​1. Scale Your Corpus

SIP mutual funds operate on the principle of compounding interest or growth. Here, returns are based on the previous principal and accumulated interest. When investors increase the principal amount, both the interest income and the new principal increase. This results in significantly higher returns. For example, a Rs. 1o,000 investment at a 1o% rate after 10 years yields Rs. 2,01,457. However, by increasing the investment by just Rs. 200 monthly, the return jumps to Rs. 2,41,748. This demonstrates how a modest monthly increase can substantially boost your returns.

​2. Achieve Goal Faster

Boosting your SIP principle accelerates goal achievement. Increasing investments is the easiest approach to property, education, or retirement. Online investors can conveniently raise contributions and expedite goals through compounding. Increasing SIP by Rs. 200 accumulates an extra Rs. 10,000 in three years, getting you closer to desired outcomes.

3. ​Protect You From Inflation

Inflation erodes money's purchasing power over time, diminishing savings' value. To counter this, increasing investments is vital. Traditional savings plans don't protect against inflation. Boosting your SIP creates a financial cushion, preserving savings' value. Take control of your future by leveraging SIP boosts to stay ahead of inflation.

Final Thoughts

SIP top-ups are a substantial bonus for investments. It covers inflation and fund needs and enables early retirement. Consistently boosting SIPs compounds investments and discounts worries. So, be diligent and make up missed top-ups in subsequent years.

 

Related articles : Top Mutual Funds For Senior Citizens In 2023 | What Is AUM in a Mutual Fund | What Are The Benefits Of Investing In Index Funds | What is An Index Fund: Its Working, & Benefits 

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