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

People wanting to invest in mutual funds through SIP often know about only the basic SIP. But to meet the investment needs of the investors, fund houses have now introduced different SIP variations. Take a look at some of the popular SIP types in this post.

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.

4 Most Popular Types of SIP

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 SIP

    Also, known as flex SIP or Flexi SIP, it allows you to adjust the SIP amount based on your financial conditions as well as the conditions of the market. With regards to the market conditions, there is a pre-decided formula, 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, like if you receive a bonus. So, basically, with flexible SIPs, the SIP amount is flexible, and 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.

    So, 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

    From all the different types of SIP, one type of SIP that deserves special attention is the perpetual SIP 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 SIP. While investors generally do 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 will run until 2099. However, you do get the option to stop the SIP by submitting a written application to the fund house. But if you only want to invest for a fixed tenure, make sure that you do 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 NAV of the scheme falls up to a certain level decided by you.

    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.

What SIP Type Should You Select?

So, there are various types of SIP plans for investors. While every investor can go with the basic SIP, you can consider one of the options mentioned above if they suit your finances and investment needs.

But, ensure that you thoroughly understand how a particular SIP type functions so that your selection can deliver the expected results.