Why You Should Increase Your SIP Every Year
Many investors think of SIPs and mutual fund schemes as synonyms, however, that is not the case.
SIPs are merely tools that allow you to invest in a mutual fund scheme over some time.
It can be monthly, quarterly, or semi-annually depending on your financial goals.
It acts as a convenient option for salaried individuals to regularly invest in mutual funds.
The money can get deducted from their account automatically thereby engraining a financial discipline.
How to Start SIP Investment?
You can start a SIP with a minimum amount of Rs. 500. Here is how to start a SIP
investment if you wish to buy mutual funds.
• Basic Information
The first step of SIP investment requires you to provide all your basic personal information in an online form such as your name, date of birth, address, mobile number, etc.
• Aadhar Based eKYC
The above procedure for SIP investment can be simplified if you have an Aadhar card. You have to enter your Aadhar number and authenticate it with a One-Time Password (OTP).
This will pre-populate the online form with all your basic information details available in the UIDAI database.
IPV through a video call is not required if you complete the eKYC procedure through Aadhar as the UIDAI database already has your biometric information.
However, there is a statutory limit that will not allow you to invest more than Rs. 50,000 per fund house in a financial year if PAN card details are not submitted by you.
You can submit your PAN card and enhance this limit.
• Upload Documents
In the next step, you are required to upload a scanned copy of your PAN card and address proof.
Benefits of Increasing Your SIP Investment Every Year
Here are some advantages of increasing your SIP every year.
• Counters Inflation
While investing, the return adjusted for inflation is a significant factor to be considered.
As inflation increases every year, the amount you find substantial today may not have the same worth some years down the line.
Hence, if you do not increase your SIP investment amount every year, you ignore inflation which erodes the purchasing power of your hard-earned money.
• Builds A Bigger Corpus
When your income and surplus increase every year, it makes sense to increase your SIP investment too.
It adds to the power of compounding and helps accumulate greater wealth by building a bigger corpus. Even a small 5% to 20% increase in the SIP investment plan at the end of 10, 15, or 20 years can make a big difference.
Also, you can avoid increased documentation as it will reduce the necessity of creating and tracking multiple stocks.