With an increase in my salary, I'd like to increase my SIP amount but my platform doesn't provide the option to increase the amount in my current SIP. Should I cancel the current SIP & start a new one, or start a new SIP while continuing with current SIP? What's better, keeping expense ratio & other factors in mind?
- Sourav Sharma
There is really no difference in terms of costs or any associated expenses, whether you invest through a single SIP or multiple SIPs. So from that perspective, it does not make a difference. But what I'd suggest is, if this is really a one-time increment to your SIP that you're looking to make at this point in time, then the simplest and the quickest way could be to just start a fresh SIP. Having said that, if this increment is something that you're looking to make periodically, say every year you're looking to increase this SIP amount along with your income, then adding new SIPs every year may not be a viable approach because the sheer number of SIPs can become overwhelming to track.
In that case, a top-up facility offered by fund companies would be a better alternative, where you can select a predefined amount of increment either in rupee terms or percentage terms to your existing level of SIP at predefined intervals and you can also specify the upper limit to the SIP amount, beyond which the increments are stopped. So that is a kind of facility that may be of use to you and you can look out for a platform which provides the top-up facility.
An alternate way that many investors follow, which you can consider, is to set up SIPs only for a one-year period at a point in time. And then, towards the end of the year, when the SIPs are expiring, it gives you a natural opportunity to reflect back on the investments, take stock of them, consider whether funds are doing well or there is merit in looking to change any of the funds, if there is a need to rebalance the investments or rebalance the asset allocation. And while doing that, also decide upon what would be the kind of SIP amount that you would like to keep for the next one year and then create an SIP for the next one year of that amount and repeat this process the next year. So that's also an approach that you can follow but you should do that only if you do not fall into procrastination and do not keep sitting upon the SIP renewals. Because if you do that, it could be far more detrimental and can come at a great opportunity loss. So I would suggest that if you have these tendencies to procrastinate then a top-up facility would be a better one for you.