What are the
Different Types of SIPs? And what type of SIP you should select?
Mutual fund is an easy investment
option for individual investors and SIP is a route to invest in mutual funds
through which you can invest a pre-determined amount at regular intervals. SIP
gives a chance to adopt a disciplined way of investing. Remember to achieve
your financial goals, you need to invest regularly. You can choose the best
mutual funds as per your financial goals and risk tolerance, to serve your
purpose. You can make investments every month or quarter in SIP. Investing in
SIP will help you to generate significant returns in the long run. In this
article we the best financial advisor in Lucknow will discuss the types of SIPs in brief.
Types of Systematic Investment Plans (SIP)
SIP helps you to begin your
investment journey with a small amount. With most funds, the minimum amount to
invest in SIP is only Rs. 500/month. There are many people who want to invest
in mutual funds but don’t have knowledge of basic functioning of SIP; many of
them are unaware of the various types of SIPs that are there for long term
and short term investments with great returns. Fund house offer five types of
SIP to their investors to make it easy for them to keep investing. Let’s take a
look:-
1.
Regular Sip
2.
Flexible
SIP,
3.
Top-up SIP
and Step up SIP
4.
Trigger SIP
5.
Perpetual
SIP
Regular SIP
Regular SIP is one of the best
and simplest type of Mutual Fund investment plan. In this SIP, you can invest a
fixed amount of your income at regular intervals. You can start your SIP monthly,
bi-monthly, quarterly or half-yearly. There is also a daily and weekly SIP. However,
these are not highly recommended ones. While choosing your SIP, you can mention
the time duration, asset allocation, instalment amount and frequency. In this SIP,
investors are not allowed to change the investment amount during the tenure of
the investment.
Flexible SIP
As the name suggest the Flexible
SIP allows investors to be flexible with their SIP amount. It is also known as
Flexi SIP. You are free to increase, decrease or pause your SIP as per your
financial condition and your requirement. In Flexible SIP you can change the
SIP amount based on your financial and market condition. There is a pre-decided
mutual fund formula that helps investors to invest more when the markets are
falling and reduce the SIP amount when the markets are high. In this way, you
don’t need to stop your investments and you can continue to build wealth.
Similarly, you can increase the investment amount after a rise in your salary.
Top up SIP
Top-up SIP is also known as Step-Up SIP. This
SIP allows you to gradually increase
the SIP amount at fixed intervals or say every year. In this Top-up SIP investors
can increase their SIP amount periodically. Initially, start investing
with Rs. 10,000 in any mutual fund scheme of your choice and instruct the fund
house to increase the SIP amount by Rs. 1,000 every year. So, after the first year
of investing Rs. 10,000 every month, you SIP amount will be increased to Rs.
11,000 per month for the next one year. These
help investors to create their investment corpus faster because of the power of
compounding. Therefore, we as a best financial advisor in Lucknow suggest you to
choose SIP plans that offer this facility to top up the investments.
Trigger SIP
In trigger SIP, mutual fund
houses redeem a small portion of the investment from the entire investment in
one fund to another fund after it activates a certain trigger including NAV
trigger, Index level trigger, capital trigger and time-based triggers. This SIP
is best for those investors who understand the working of mutual fund and
markets. New investors who do not have any knowledge in investment market
should not go for this SIP. Trigger SIP
is suitable only for those investors who are well aware of the market dynamics.
It is essential to have good knowledge
and experience in mutual fund to set appropriate triggers effectively.
Perpetual SIP
Perpetual SIP is best for
investors with long-term financial goals. Usually investors opt One year SIP,
Five year SIP, etc. as their end date. Perpetual SIP is another best SIP that
is linked to every SIP investor. Investors do not require mentioning a termination
date in Perpetual SIP. They can keep on investing as long as they want to
achieve their financial goals. This SIP doesn’t have a renewal policy. This SIP
generally targets long term financial goal of investor for great return.
Which type of SIP is best to
invest and Why?
Which
SIP is best from the above option depends upon the investor’s goals, income,
and knowledge. In SIP, one has to invest the set amount regularly. Investor can
also increase their SIP amount as per market dynamics or having additional
income at hand. A regular SIP is best for those investors who have a regular
source of income and want to save for a secured future. A top-up SIP is best to
reach the financial goal faster and helps in accumulating a higher amount as
the investment keeps increasing every year. A perpetual SIP is same as regular
SIP that continues till investor reach their financial goal. Flexible SIP best suits
investors with irregular income, like professionals and freelancers. Trigger
SIP is best for only those investors who have good knowledge about market
dynamics. Investors should select a SIP that best suits their financial
requirements and fulfil their goals.
Conclusion:-
Systematic Investment Plan is a great investment facility for investors who are looking to
achieve their financial goals by making regular investments at a pre- defined interval.
No matter the way you invest, but make sure
that your investment objective aligns with the scheme you are investing in. Investors
are also advised to do some research about the fund before investing. Do check some
parameters including the fund’s expense ratio, fund size, investment strategy,
etc. Lastly, if you are new to investing please get some financial expert advice
before investing.
**Mutual Fund Investments are
subject to market risks, read all scheme related documents carefully.
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