An SIP (systematic investment plan) allows you to make regular investments. Using this mode, you can invest a predetermined small amount in the mutual fund of your preference periodically over the long term to yield a massive corpus to attain your crucial financial goals. Periodic intervals in the SIP mode may be on an annual, six-monthly, quarterly, monthly, or weekly basis. Also, for most SIP investments, the minimal investible amount is just Rs 100. However, like mutual funds, an SIP also has its distinct kinds, which you must be aware of before starting your investment. Mentioned here are the four distinct types of SIP investments –
- Top-up SIP mode
As your income increases with time and career growth, your investible surplus increases too, which you may use to top-up your existing SIP. The top-up option allows you to increase your existing SIP amount on a periodic basis. For example, you can increase your existing investment towards an SIP of Rs 10,000 per month by Rs 3,000 every year. This means, after a year, your monthly contribution would be Rs 13,000 and in the next year, it would enhance to Rs 16,000 and so on. Mutual fund investment via a top-up SIP route might permit you to achieve your financial goals quickly.
- Perpetual SIP mode
In case of the perpetual SIP mode, there’s no defined date set when you should stop your SIP investment. Your contributions here are continuously invested till you request to end your SIP.
- Flexible SIP mode
A flexible SIP provides the convenience to increase or decrease your SIP contribution periodically as per your cash inflows. While a fixed amount is set when starting your flexible SIP investment, you have the option to change your investment contribution a week before every contribution date. If you invest in an SIP through the online mode, then managing this kind of SIP is simpler.
- Trigger SIP mode
If you are experienced, you might opt for the trigger SIP mode. Here, you have the option to set a trigger to redeem your SIP automatically or shift to another mutual fund scheme in the case of market volatility.
Which SIP mode must you select?
All SIP types come with their own set of pros and cons, and which type is well-matched for you depends upon your requirement and preference. For example, if you are looking for a mutual fund or an SIP that can provide tax benefits, then you must go for the ELSS (Equity Linked Savings Scheme) mutual fund. Similarly, if you are looking to enhance your SIP amount periodically with an increase in your annual income, then you must choose the top-up SIP mode.
In case you are looking to change your investment at periodic intervals, then you may opt for the flexible SIP route. Perpetual SIP mode may be opted for if you are uncertain about the goal’s time frame. Lastly, trigger SIP mode is prudent for you if you are an experienced investor and tend to review the market periodically and may want make changes to your SIP investment based on the market volatility.
