Can I Increase My SIP Amount In Mutual Funds?

Can I Increase My SIP Amount In Mutual Funds?

With every appraisal, we often ask ourselves – What Can I afford now? But dedicated investors ask themselves – Can I increase my SIP amount in Mutual Funds?

Systematic investment plans (SIPs) are regarded as a disciplined way of investing in mutual funds. This method of investing gives investors the twin benefits of managing fluctuations in the market through rupee cost averaging and compounding benefits in the long run.

Nowadays, SIPs have become a popular way of making investments in mutual funds because they enable pouring money in a disciplined way over many years. Financial experts believe that SIPs can be considered for both beginners and professionals.

It is advisable that investments in mutual funds should be started in the early stages of life so that a significant wealth corpus can be built. Even a small amount of money each month can bring a big difference to the wealth corpus in the long run.

Initiating the investment process late can end up being costly for 1 major reason. Late investors are not able to capitalize on the benefits of compounding. Simply put, compounding means reinvesting the return one earns on the invested amount.

As a result, this can help investors to earn more income. Compounding strategy makes your money work for you. Therefore, it is regarded as a powerful tool to grow and increase your wealth.

There are individuals who use the power of compounding to plan future goals, such as retirement. However, one question is asked by most first-time investors, “Can I increase my SIP amount in mutual funds?” 

Therefore, the focus of this article will be to help our readers know whether or not this is possible. Apart from this, other critical aspects related to SIP will also be discussed in this article. Read on!

SIP Amount In Mutual Funds

Every time an investor invests in a mutual fund scheme through SIP, he/she purchases a certain number of fund units corresponding to the amount which has been invested.

This is beneficial because they don’t have to time the markets while investing as they tend to benefit from both market movements. When the markets fall, such investors end up purchasing more units, while fewer units are purchased when the stock market surges.

In India, SIPs can be initiated for as low as INR500 per month. Investments can be made in equity mutual funds as such investments will seek long-term capital appreciation.

Let us now discuss our question in hand “Can I increase my SIP amount in mutual funds?” It is important for investors to know that there are two ways to go about it.

Ways To Increase SIP Amount In Mutual Funds

They will need to make fresh SIP investments in the existing fund having the same folio number without touching the existing SIP investment.  Another process is terminating the previous SIP, and then making a fresh purchase with a higher amount.

To have a clear understanding, let us explain this with the help of an example. If an investor already has a SIP running for INR1000 and he/she wants to increase the investment to INR 1,500, they will have to start a new SIP of INR 500 and also continue the SIPs that are currently running.

On the contrary, if an investor wants to reduce the SIP amount, he/she will have to cancel the SIP which is currently running and start a new one with a lower amount.

The second method is focused on increasing SIP at certain intervals. For example, you began investing INR3000 per month in an equity mutual fund and you have made a decision to continue this for two years.

If you plan to park more money into this SIP, go for a SIP top-up. This will allow you to automatically increase the SIP amount by a pre-defined percentage (e.g. 40%) at regular intervals/every year.

Even though you cannot increase your SIP amount automatically every month, you are allowed to increase it at specific periods such as quarterly or annually through top-ups.

You are also allowed to make additional purchases in your SIP account folio whenever you plan to invest more money.

Also Read: Which Is The Best SIP Date For Mutual Fund Investments?

To Sum Up

Above are the ways to increase your SIP amount which can further help you to achieve long-term financial goals. More often than not, increasing the SIP amount can help you in several ways.

Increasing your SIP can allow you to make certain adjustments to anomalies such as differences caused by the inflation rate which can be higher in comparison to your expectations, the actual return on investment can turn out to be lower than what was expected, etc.

If you have set specific long-term goals, such as higher education, retirement, and so on, minor adjustments made by increasing your SIP can ensure you meet the target even when the market moves against your expectations.

Therefore, budgeting expenses and investing in a smart way are of utmost importance. Spare change, if invested well, can result in a bigger change for tomorrow.

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