Types of SIP

Types of SIP: Know which one to select and how?

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Imagine you are at a restaurant, and the menu has a vast array of dishes to choose from. You can opt for a classic burger, a sushi roll, or a fancy Vietnamese pho. Having choices is a wonderful thing. It gives you the power to make decisions and shape your experiences in the way you want. You can mix and match, try new things, and have fun with it! The world of investment is also full of choices – not just in the types of investment instruments but also in the methods. The Systematic Investment Plan (SIP) is a method of investing in mutual funds. And with six types of SIP, you get to choose exactly how you wish to invest your money. Let's find out more. 

Six different types of SIPs 

  • Regular SIP
  • Top-up SIP
  • Flexible SIP
  • Perpetual SIP
  • Trigger SIP
  • Multi SIP

  1. Regular SIP: 

    This is the most basic type of SIP that allows you to invest yearly, bi-monthly, monthly, weekly, or daily in a mutual fund scheme of your choice. For example, an SIP of Rs 5,000 every month in a scheme of your choice is a regular SIP.

  2. Top-up SIP: 

    A top-up SIP lets you add extra money to existing mutual fund investments at regular intervals. It allows you to increase your SIP contribution by a fixed % or fixed amount to achieve your financial goals faster. For example, you can request the fund house to increase your SIP amount by 10% every year so that your investments align with your annual increments.

  3. Flexible SIP: 

    Also known as Flexi or Flex SIP, this type of SIP enables you to alter your SIP amount for your upcoming investments. Flexible SIPs can be useful when you have surplus or inadequate funds for investments. Additionally, they also allow you to make the most of prevailing market conditions and adjust your investment strategy accordingly. For instance, you can increase your SIP amount when the market is falling and reduce it when the market is rising.  

  4. Perpetual SIP: 

    A Perpetual SIP is a type of SIP that continues indefinitely until you decide to stop it. A fixed amount of money is invested in a scheme of your choice on a regular basis, and the investment continues as long as you want. For instance, you can start a perpetual SIP of Rs 5,000 and carry on with it with no stop date in mind.

  5. Trigger SIP: 

    Trigger SIPs are made automatically based on pre-defined criteria or 'triggers'. Triggers can include market events, Net Asset Values (NAVs), etc. You can set the start or end date of your SIP based on such triggers and control your investments. For example, you can set a trigger event that the fund house must exit the scheme if the NAV falls below Rs 50. 

  6. Multi SIP: 

    Multi-SIPs enable you to invest in multiple schemes of the same mutual fund house with a single SIP. This also means you can have a diversified portfolio with less paperwork.

Which is the best type of SIP of all?

There is no right or wrong when it comes to selecting a type of SIP. The best option for you depends on several factors, such as your risk tolerance, financial goals, investment time horizon, and financial situation. There is no one-size-fits-all solution, as what may be the best option for one person may not be suitable for another.

However, here are a few tips that can help you decide on the type:

  • People with irregular income can select top-up SIPs or flexi SIPs
  • People with regular income can select regular SIP, perpetual SIPs, multi SIP, etc.
  • People with good market expertise can choose trigger SIPs

Conclusion

It is important to research and consider each method’s pros and cons before selecting an SIP. Additionally, you may want to use an SIP calculator or seek financial advice to make calculated and informed investment decisions.


An investor education initiative by Edelweiss Mutual Fund


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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS. READ ALL SCHEME-RELATED

DOCUMENTS CAREFULLY

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MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.