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Business News/ Money / Personal Finance/  Mutual funds: 5 different types of SIPs in India and their features
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Mutual funds: 5 different types of SIPs in India and their features

SIPs, regardless of their type, promote a regular savings habit and help investors stay invested in mutual funds for the long term. In this article, we will delve into the different types of SIPs available in India.

Regular SIP is the most common and widely used type of SIP in India.Premium
Regular SIP is the most common and widely used type of SIP in India.

Systematic Investment Plan (SIP) has revolutionised the way Indians invest in mutual funds, offering a disciplined and convenient approach to wealth creation. SIPs allow investors to contribute small, regular amounts at predetermined intervals, helping them build their savings systematically.

As the popularity of them has grown, various types of SIPs have emerged to cater to the diverse needs and preferences of investors. In this article, we will delve into the different types of SIPs available in India.

Regular SIP

Regular SIP is the most common and widely used type of SIP in India. In this form of SIP, investors contribute a fixed amount at regular intervals, such as monthly, quarterly, or annually. The fixed amount is automatically deducted from the investor's bank account and invested in the chosen mutual fund scheme.

Regular SIPs offer the advantage of rupee-cost averaging, allowing investors to buy more units when the prices are low and fewer units when the prices are high. This averaging helps mitigate the impact of market volatility on the investment.

Flexible SIP

Flexible SIP, as the name suggests, offers flexibility in the contribution amount. Unlike Regular SIP, where investors need to contribute a fixed amount, Flexible SIP allows investors to vary their contribution amounts as per their financial situation.

Investors can increase, decrease, or even pause their SIP contributions, depending on their cash flow requirements or market conditions. This flexibility makes it easier for investors to align their SIPs with their financial goals.

Top-up SIP

Top-up SIP allows investors to increase their SIP contributions at predefined intervals. This feature enables investors to boost their investments as their income grows or when they receive additional funds.

For example, an investor can opt for a top-up of 10% on the original SIP amount annually.

This ensures that the investment keeps pace with inflation and increases the potential for higher returns over time. Top-up SIPs are ideal for investors who expect their income to rise or have a variable income stream.

Trigger SIP

Trigger SIP allows investors to set certain triggers or conditions for their SIP investments. When a specific market event or a predefined condition is met, the SIP installment is executed.

For example, an investor can set a trigger to invest a higher amount when the market reaches a certain level, ensuring that the investment is timed strategically.

Trigger SIPs offer investors a tactical approach to investing, enabling them to capitalise on market opportunities and make informed investment decisions.

Perpetual SIP

Perpetual SIP, also known as Evergreen SIP, does not have a fixed tenure and continues indefinitely until the investor chooses to stop it. In Regular SIPs, investors need to specify the tenure or number of installments while starting the SIP.

However, in Perpetual SIPs, the SIP continues until the investor submits a written request to stop it. Perpetual SIPs are suitable for long-term investors who wish to continue their SIPs without interruption or hassle of renewals.

SIPs, regardless of their type, promote a regular savings habit and help investors stay invested in mutual funds for the long term. Investors should be mindful of the investment objectives, fund performance, and expense ratios while selecting mutual funds for SIPs.

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We elaborate on the magic of compounding in mutual fund SIPs.
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We elaborate on the magic of compounding in mutual fund SIPs.

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Published: 31 Jul 2023, 08:36 AM IST
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