Types Of SIPs: What are the Different Types of SIP Plans in India?

SIPs or Systematic Investment Plans are one of the most sought-after methods for investors to invest systematically and steadily over the long term. Investors in India prefer to invest in Mutual Funds through SIPs. However, investors are aware of a single type of SIP that comes in its most basic form. To meet the investment needs of the investors, fund houses have now introduced different SIP variations.

A systematic Investment Plan or SIP helps you begin your investment journey with a small amount. With most funds, the minimum investment amount is only Rs. 500/month. But, while people who wish to invest in mutual funds know about the basic functioning of SIP, most are unaware of the various types of SIP now available. Take a look at some of the popular SIP types in this blog.

Fund houses have introduced multiple SIP variations to suit the needs of all the different types of investors. Some of the most popular options are:

Flexible SIPs

Also known as Flex SIP or Flexi SIP, it allows you to adjust the SIP amount based on your financial conditions and the market conditions. There is a pre-decided formula regarding the market conditions, which enables the investors to invest more when the markets are falling and go for a lower SIP amount when markets are high.

Similarly, in case of a financial crunch, you can reduce the SIP amount and increase the same if you have more disposable funds. With flexible SIPs, the investor has the option to adjust the amount as required.

Step-Up SIP

Step-up or top-up SIP allows you to increase the SIP amount at fixed intervals. For instance, you might start investing with Rs. 10,000 SIP in a mutual fund scheme of your choice and instruct the fund house to increase the SIP amount by Rs. 1,000 after every six months.

As per your request, after the first six months of investing Rs. 10,000/month, the SIP amount will be increased to Rs. 11,000/month. It will again increase by Rs. 1,000/month from the 13th month. Step-up SIP can be an excellent option for salaried employees expecting a raise shortly.

Perpetual SIP

Perpetual SIP is one of the best options available in the systematic investment spectrum as it is linked to every SIP investor. When you start a SIP, the SIP mandate requires you to mention the start and end date for the same. While investors generally mention the starting date, most do not fill in the ending date.

Every SIP with no end date mentioned in the mandate turns into a perpetual SIP, which is deemed to run until 2099. However, you do get the option to stop the SIP by submitting a written application to the fund house. If you only want to invest for a fixed tenure, make sure you enter the SIP end date as well.

Trigger SIP

With the Trigger SIP, you get to set a trigger for your SIP investment. For instance, you can mention that your SIP amount should be withdrawn from your bank account and used to purchase units of the selected scheme only if the Net Asset Value (NAV) of the scheme falls to a certain level.

You get other trigger options such as specific dates and even levels of an index like Nifty or Sensex. But, this option is recommended only for experienced investors who have the knowledge and experience to set such triggers effectively.

There are various types of SIP plans for investors that can allow them to achieve specific financial goals. While every investor can go with the basic SIP, you can consider one of the options mentioned above if it suits your finances and investment needs. However, you should ensure that you thoroughly understand how a particular SIP functions so that your selection can deliver the expected results.