Types of SIP Plans

In today’s age, it is very important to have proper financial planning to create a financial cushion to achieve your short and long-term objectives. However, achieving ultimate financial goals can become easier if you make the right investment choice and choose investment instruments that can provide higher returns over a long period.

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SIP Benefits
Start SIP with as low as ₹1000
Start SIP with as low as ₹1000
No hidden charges
No hidden charges
Save upto ₹46,800 in Tax
Save upto ₹46,800 in Taxunder section 80 C
Zero LTCG Tax
Zero LTCG Tax^ (Unlike 10% in Mutual Funds)
Disciplined & worry-free investing
Disciplined & worry-free investing

A proper investment planning requires discipline and regularity in investment so that the volatility of the market can be neutralized.

As people are becoming smarter in regard to the right investment options, there are a plethora of investment instruments available in the market. One of the most common and disciplined investment options to invest in is SIP plans.

In very simple terms, SIP can be described as a method of investing money in a specific mutual fund^^ scheme on a predetermined date per month. SIP helps to create a strong portfolio over a longer period so that the amount invested by you can reap higher returns in the long run.

SIPs are open-ended funds which provide the option to invest and withdraw money anytime. Apart from this, there are many other benefits of investing in SIP. Let’s take a look at them.

  • Investing in SIP introduces discipline. In SIP, a fixed amount is deducted from your account every month and is invested in the fund of your choice.
  • When is the right time to invest in mutual funds? This confused a lot of people. However, making investments through SIP solves this problem as it is a periodic investment which works across the market
  • Another benefit of investing in SIP is ‘rupee cost averaging’. The investment made by you in SIP is averaged out; you tend to receive fewer units if the market is high and more units if the market is low.

Thus, it protects your investments from market volatility without worrying about the right time to invest.

How to invest in SIP?

Before discussing the types of SIP, first let’s discuss how to invest in sip:

  • You can start investing in SIP with a minimum amount of Rs.500. Moreover, investing in SIP plans is hassle-free and simple.
  • If you start investing in SIP early and for a longer tenure, then you can avail of the ‘power of compounding’. Through it, you can earn interest on the amount you invest. The interest so obtained gets accumulated and compounded over some time.
    • Here is an outline of the SIP procedure: Complete the KYC Process
    • Submit all the necessary documents such as passport, PAN card, Address proof, cheque book
    • Begin the KYC Process
    • Complete the in-person verification
    • Register for your SIP
    • Select the SIP fund house
    • Select the amount
    • SIP will start after a month of completing the process

People Also Read: sip calculator

Types of SIPs

Besides this, it may be surprising for you to know that there are four different types of SIP plans available in the market. Let’s take a look at it.

Top-Up SIP

Top-up SIP plans allow investors to increase the SIP amount at regular intervals. These plans provide an advantage to invest in mutual fund schemes that are performing well in the market. Moreover, by increasing the investment amount at regular intervals, you can accumulate a huge corpus to achieve your financial goals.

Perpetual SIP

In Perpetual SIP, the investors can invest periodically in a mutual fund scheme of their own choice every month for a pre-determined tenure. While signing up the SIP mandate, the investors have a choice not to enter the end date in the SIP mandate.

If the column is blank, it is considered to be a perpetual SIP. This provides an option for the investors to redeem the fund at the time of closing and achieve the financial goal. As SIP is specifically designed to instill the habit of financial discipline and promote a goal-based approach, it is always advised to start SIP for a fixed period. 

Flexible SIP

This is a type of SIP plan that provides an option to decrease or increase the SIP amount according to your cash flow. So, in case, if you face any type of cash crunch due to any reason then you can skip paying a few installments of SIP till your financial situation normalizes.

Similarly, you can also increase the SIP amount in case you receive a bonus or make some gains. While investing in flexible SIP, you will have to stipulate a fixed amount of investments. The plan provides an option to change the investment amount of that month 7 days before your SIP date.  

Trigger SIP

This option is beneficial for those investors who are aware of the market volatility and who have a proper understanding of the financial market. To start this SIP, you can set an index level, event, NAV or a specific date to start this SIP.  

However, it is advised to not opt for trigger SIP as it incites speculations. It is always advisable to choose a long-term tenure to foster your financial goals.

Wrapping it up!

Even though these SIP plans provide the facility of flexibility and convenience to you, your key objective should be to stay invested in SIP for a longer tenure and avoid any short-term financial limitations. Thus, you can achieve your long-term and short-term goals by making a disciplined and smart investment. 

+For Mutual Fund midcap category Returns https://www.morningstar.in/tools/mutual-fund-category-performance.aspx & for Insurance midcap fund category Returns- https://www.morningstar.in/tools/insurance-fund-category-performance.aspx
*Past 10 Year annualised returns as on 01-12-2023
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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