What Are The Different Types of SIPs You Can Invest In?
Called Systematic Investment Plan, SIPs are facilities through which interested investors can invest in a wide range of mutual funds. Suppose you do not have the necessary facility for making a lump sum mutual fund investment. In that case, SIP lets you invest in instalments, which could either be weekly, fortnightly, monthly, quarterly, or so on. For investing as SIPs, you should select funds you wish to invest in – equity, hybrid, or debt funds, the monthly instalments, and the date.
You can make more than one mutual fund investment through SIPs at any time. Choosing and narrowing down on the best can be challenging.
However, there are four main types of Systematic Investment Plan for you to choose from. They are as under:
Top-up SIP plans
This enables the current investors to increase their SIP at regular intervals. As an investor, you can benefit from different mutual funds that are performing well. You could increase your contribution, especially when you have surplus funds or when your income rises. You need not continue the same instalment amount and tenure and can revise them whenever you have the provisions.
Increasing the monthly instalment amount lets you accrue better profits based on your fund performance and help you achieve your financial goals rapidly.
Flexible SIP plans
This is where you can quickly increase or reduce the SIP investment according to your cash flow. For example, increase the SIP amount when your salary rises annually or when you get annual bonuses or incentives. Similarly, reduce the amount when you face financial challenges such as crunch, loss of employment, etc. The flexible SIP makes it is impossible to not miss instalments until your economic conditions improve.
Perpetual SIP plans
Investors opt for a fixed tenure for a SIP mutual fund, ranging between one to five years. However, if you do not select a specific end date for the investment, it is considered perpetual. Such SIPs let you redeem your mutual funds whenever you want or believe you have achieved your financial goals. However, perpetual SIPs are not necessarily the best as compared to fixed period SIPs.
Trigger SIP plans
If you are an investor with years of experience in the financial market, then trigger SIPs might be the best investment. These SIPs are not best for novices who lack knowledge of how investment works. Also, these SIPs encourage speculation, which is why they are considered less desirable. Triggers SIPs lets investors set NAVs, index levels and decide the date for starting SIP investments.
This method of investment is best for new investors who want to benefit from the market investments. While shortlisting the best SIP via PC or mutual fund apps, consider their past performance, the returns accrued in the last three to five years, and prospects of the company offering the fund.