Top up SIP can help you beat inflation.
How exactly Top SIP is different from a normal SIP, let’s see. SIP is systematic investment plan where a fixed amount is auto debited from your bank and credited to a particular mutual fund which you have selected and the amount is fixed all the time till the time you don’t change.
Now let’s talk about Top SIP, here the amount is not fixed but increases in either percentage form or Rs form on a yearly or half yearly basis to beat the inflation.
Let’s understand with an example:-
ears assuming returns as 14% CAGR
The Future value after 10 years would be approximately 26.2L, let’s see if you have increased the SIP amount by say 10% annually to beat the inflation what would be the future value after 10 years.
SIP amount – 10K
Tenure – 10 Years
Annual increase – 10%
Expected returns – 14%
Total Investment Amount would be – 19.12L
Future Value after 10 years – 37.4L
In normal SIP the future value was 26.2L and in Top up SIP the future value would be 37.4L nearly a difference of 11.2L by just increasing 10% pa.
I hope I was able to explain the concept well.
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