SIPs are one of the most popular means of investing in mutual funds, for they allow making small and fixed investments over a regular interval of time. With an SIP, one can invest in mutual funds at a nominal amount as low as Rs. 500. But at the same time, it does not mean that you have to remain stuck with the nominal investment or the amount that you had started with. With the change in income, you can change your SIP investment amount as well. Using tools like the mutual fund SIP calculator, you can easily calculate the ideal amount to be invested and the expected return.
How to Increase the SIP Amount?
The amount of your SIP can be increased either through the same SIP that has been operating or by opening a fresh SIP of the additional amount. To increase the SIP contribution, the initial mandate has to be cancelled, and a revised proposal has to be submitted. Depending on your increased disposable income and your goals, you can determine the addition to your SIP. Use SIP calculators to make a precise call on the same.
This is best suitable in case of an increase in personal disposable income, reduction in expenses or a hike in salary. If there is an increase in salary, the same can be used to invest by increasing the SIP amount. In the long run, efforts should be made to cut unnecessary expenses and put into use the saved amount to increase investment corpus. Furthermore, you can add a lump sum amount to your existing SIP. To gauge the returns from such additions, it is best to use SIP calculators.
How Much Should Be the Increase in SIP?
For an individual who is already maintaining a mutual fund using SIP, it is well recommended to increase the SIP amount by 10% of the existing contribution. Usually, a 10% annual increase in the SIP amount is considered to be ideal for a healthy financial pool of mutual fund investment. However, this is a generic value, more of an approximation. Depending on one’s income, expenses and ability, a consistent increase in the SIP amount is seen as a disciplined and beneficial financial habit.
Why Increase the SIP Amount?
While investing in SIP allows the investor to stay relaxed, a predetermined amount is automatically deducted from the account at a predetermined date at preset intervals. However, investors mustn’t get lax with their SIP investments.
The currently contributed SIP amount is decided to take into considerations a definite rate of inflation and the expected return on the investments. These are highly volatile and dynamic variables. To ensure that when the need arises, or when a life goal is realised, the return from your mutual investment does not fall short, one should eventually strive to push the SIP investment amount. And in case such spikes do not occur, then you’re left with returns higher than your expectations and will allow you to cater to your other needs and goals.
If you’re in two minds about whether to increase your SIP amount, make a well-informed decision with our SIP calculator. Make your SIP investment decisions using the expert help of CRED.