Definitely you can alter the SIP amount. Actually one of the biggest benefits of SIP is that you can change the investment strategy in accordance with the changing objectives and salary.
Systematic Investment Plans (SIPs) allow for the utmost flexibility wherein you could choose an investment strategy according to your shifting financial situations. In SIPs, one major flexibility is that one can alter the investment amount.
Why increase the SIP amount?
With every change in financial condition, there might come a change in investment goals as well. Here are some reasons for increasing the SIP amount:
Increased Earnings: If you receive a pay raise, bonus, or any other form of additional income, you can increase the SIP amount and accelerate your wealth creation. You will be able to invest more aggressively and potentially achieve your financial goals much sooner.
Lower Income: In case of financial crisis or a job loss, or pay cut, or unexpected expenses, you would end up decreasing the SIP amount since you have to manage cash flows to avoid stress about the liquidity.
Changing Financial Goals: Depending on the change in the life stage, financial goals may change. For instance, if you are planning to buy a house, get married, or start a family, you might have to increase the SIP amount to meet the specific goals. If the goals change, then you may reduce the SIP amount.
Market Fluctuations: Even though SIP is supposed to reduce market volatility by averaging, massive market crashes provide an opportunity to increase the amount of your SIP. Investment in higher quantities during market depressions could make a difference by way of getting lower valuations and consequently higher returns through long periods.
Here’s how to alter your SIP amount:
Suspend and start a new SIP
You can stop your existing SIP and begin a new one with the amount you want. However, that involves some paperwork or online processing as per your platform.
Top-Up SIP or Step-Up SIP
Many mutual fund schemes allow you to top up for an SIP wherein you can increase your SIP amount at periodic intervals. It may be yearly or at a gap which suits you the best.
Lump Sum Investment
You can invest as lump sums in the same mutual fund if you want to increase the contribution instead of altering your SIP.
How to Change SIP Amount
It is a pretty smooth process to alter the SIP amount. You could change your SIP amount with help of many avenues:
- Online Channels: Most websites and apps of mutual funds would allow you to change your SIP amount online. You would just have to log into the account, find the relevant SIP, and then change your amount following a few instructions. It is usually the fastest and most efficient way to make changes.
- Brokerage Platforms: If you are investing through a brokerage firm, then you will be able to change the SIP amount through their portal or mobile app. You might have to navigate a little bit across different platforms, but it won’t be that tough.
- Offline Methods: Bank Branches: If you opened your SIP through a bank, then you simply go to your branch and get that changed by asking in terms of changing the SIP amount.
- Mutual Fund Distributor: You can call them and get it done even that way. They shall process your needs and also make the ambiguities clear about the modification you desire.
- Timing: It would be a good idea to change your SIP amount well in advance of your next installment date, so that there is time for the changes to reach your financial institution or mutual fund company.
- Rules on platforms: The rules as well as the timelines could vary on each platform to process SIP amount changes. Familiarize yourself with the rules and regulations on your platform to avoid delay and complication.
- Regular Review: Financial goals and income should be reviewed frequently to understand whether one should increase SIP amount. In this manner, a proper adjustment of investment strategy would take place timely.
With an understanding of the flexibility of SIPs and management of an investment strategy, you can get maximum returns from investments while working towards your long-term financial goals.
FAQs on SIP(Systematic Investment Plan):
Should I raise my SIP amount every year?
It is a wise decision to increase your SIP amount each year. This way, compounding helps, inflation can be countered, the goal gets achieved faster, and one gets financial discipline. Yet, make sure it remains affordable and diversified.
If I raise my SIP by 10% each year?
Increase SIP by 10% every year. Compounding builds wealth, outruns inflation, hastens goal realization, and builds financial discipline. Do not forget to factor in affordability and diversify investments and review at intervals.
What if I am not able to increase my SIP every year?
Even if you cannot increase your SIP every year, constant investing through SIPs is very powerful. It uses compounding, reduces market volatility impact, fosters financial discipline, and benefits from long-term investment. Choose appropriate funds, review them regularly, and consider increasing gradually. So, invest.