SIPs or systematic investment plans are one of the most widely used methods to invest in mutual funds by investors. However, many investors may not be aware of the SIP top-up facility they can use to boost their investments and take advantage of market fluctuations for their benefit. Thus, in this article, we will take a look at some of the key benefits of using SIP top-ups during a period of volatile market conditions.

What is an SIP top-up?

An SIP top-up is an additional SIP-related feature that allows investors to increase their monthly SIP investment by a fixed amount or percentage. For instance, if you have a ₹5,000 monthly SIP, you set up a SIP top-up to increase the investment by ₹1,000 every year. So, in the first year, you will invest ₹5,000 per month, and in the second year, the invested amount will become ₹6,000 per month, ₹7,000 per month in the third year, and so on. Regular SIP top-ups can help increase the value of your investment corpus significantly in the long run.

How do SIP top-ups help in a volatile market?

Here are some of the key reasons why you should consider implementing SIP top-ups for mutual funds when the market is volatile.

• Improves average buying price: If you increase your invested amount while the market is facing a downturn or going through a volatile time instead of a boom, you can purchase more mutual fund units at a lower price compared to when you invest in a market that is at an all-time high or near all-time high. With the SIP top-ups, you can increase your returns by buying more mutual funds when they are cheaper and profit when the rate goes up.
• Aligns with your growing income: As your career progresses and your income grows, you can continue increasing your investment proportionally by using the SIP top-up. This ensures that your investments automatically rise with your income, and you do not have to manually keep increasing your investment levels each time.
• Helps protect against inflation: Every year inflation eats away at the value of your cash savings. By increasing the ratio of your investments into mutual funds every year with SIP top-up investments you can ensure that the value of your assets continues to rise and does not get eroded with inflation.
• Reach financial goals faster: If you are investing in mutual funds to reach a certain financial goal, such as saving up for a down payment on a house, for children’s education, or even for an exotic vacation, SIP top-ups will help you reach your goals faster and leave a little room to save up some extra funds as well thanks to the power of compounding.

To conclude

SIP top-ups can be immensely helpful in your investing strategy by allowing you to increase your mutual fund purchases while the price is down, reach your financial goals faster and automatically boost your SIP mutual fund contributions as your income grows over time. However, it can be a good idea to review your investment strategy every few years and make changes if any of your mutual funds are underperforming. If you are confused about incorporating SIP top-ups in your investment strategy, consider getting in touch with a financial advisor.