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Different Types of SIPs in India

Updated On Aug 14, 2021

SIP or systematic investment plan is an easy way of investing in mutual funds. An individual is required to invest a fixed amount in mutual funds on a monthly basis. A significant thing to note is that in SIPs, the money is automatically debited from one’s bank account. One of the key benefits of investing in SIPs is that the investor can stop anytime. Moreover, not only one can skip their SIP payment, but also start in very small amounts. SIP investments do not require one to worry about timing the market. A fruitful investment, SIPs are a key investment form that keep term risks, short term volatility, overspending, emotional & impulsive reactions and others at bay. 

Types  of SIPs

The different types of SIPs are as follows:

1. Flexible SIP

Flexible SIP is also referred to as flex SIP or Flexi SIP. In this SIP type, one can adjust the SIP amount on the basis of their financial conditions while keeping the market conditions in mind. Based on a preset formula, investors can invest more in case the markets are falling and opt for a lower SIP amount when the markets are high. In the case of a financial crunch, the investor can reduce the SIP amount or increase the SIP amount if you possess more disposable funds.

2. Step-Up SIP

Also referred to as top-up SIP, an investor can increase the SIP amount at fixed intervals. It is one of the best SIP options for salaried employees who are expecting a rise shortly.

3. Perpetual SIP

This SIP type is linked to every SIP investor. At the beginning of a SIP, the SIP mandate demands an investor to mention the SIP start and end date. In general, investors mention the SIP start date, but do not provide the SIP end date. 

Every SIP that lacks an end date in the mandate transforms into a perpetual SIP, which will run until 2099. It must be kept in mind that an investor can stop the SIP by submitting a written application to the fund house. 

It is advisable that if one wants to invest for a fixed tenure, they provide the SIP end date by all means. 

4. Trigger SIP

Under this SIP type, one can set a trigger for their SIP investment. For example, you can mention your SIP amount to be withdrawn from your bank account and used to buy units of the selected scheme only on the condition that the NAV of the scheme falls up to a specific level that is decided by you. You can also use other trigger options like levels of Nifty/Sensex or specific dates. 

It is advisable that only experienced investors with massive knowledge and experience of setting such triggers should opt for this type.

Final Words

The range of types of SIP plans for investors is quite vast. While you can easily go with the basic SIP, it is advised to choose any of the four SIP types, namely Flexible SIP, Set-Up SIP, Perpetual SIP or Trigger SIP on the basis of one’s finances and investment requirements. 

Lastly, it is recommended to have a thorough understanding of how a particular SIP type works so that the ultimate decision made is worthwhile.  

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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