Investment in Mutual Funds through Systematic Investment Plans i.e. SIPs is steadily increasing in India. The number of SIP portfolios in the country will cross 10 crore by October 2024, but not all SIPs are equal. These are mainly of 5 types. By knowing this you can guess which SIP is right for you according to your age and needs.
1. Regular SIP Through this you can invest in any mutual fund scheme every month, every two months, quarterly, half yearly or annually. You can also start this SIP online. A fixed amount is then debited from the investor's account on a fixed date and automatically invested in the prescribed mutual fund scheme. Investors can choose the investment interval, tenure, amount and frequency right from the start. Once selected it cannot be changed again and again.
2. Flexible SIP In this the investor has the freedom to change the SIP amount. That is, if the investor's financial condition is good in any month, he can increase the SIP amount and if there is any financial difficulty, he can decrease the amount. An investor has more control over his investment as compared to regular SIP. You can also stop SIP for a while if required, which can be easily restarted later.
Better for people like: This is for investors whose income and expenses are uncertain or who may have large sums of money at any time. This method is better for freelancers, business owners or self-employed investors who want to take advantage of market fluctuations.
3. Step-up SIP In this the investment amount is increased regularly. Compounding gives more benefits as the investment amount increases. This helps in collecting a large sum of money in the long run. Depreciation of rupee due to inflation can also be countered.
It is good for: For employees who get increments every year or at regular intervals. Businessmen whose profits increase every year or investors who want to plan financially for buying a house, children's education, retirement etc.
4. SIP with insurance Many mutual fund companies offer such special offers. This has both investment and insurance benefits. Investors do not have to pay any separate premium for insurance cover. Under this, the investor gets an opportunity to accumulate funds for a long period of time with term insurance coverage.
The nominee gets a fixed sum assured in case of premature death of the investor during the SIP period. Generally the insurance cover is low in the initial years, but increases gradually.
Better for people like: It is good for fixed income investors who want to accumulate large funds and also provide insurance coverage to the family. It is also better for those who are starting to invest in mutual funds or who do not have separate insurance and want financial security at the initial stage.
5. Trigger SIP Under this an investor invests in a SIP based on a specific condition or trigger. In this a fixed amount is invested every month at regular intervals, but this amount is invested only when a certain condition or level is formed in the market. Triggers can be of many types, such as…
- Index Level Trigger: If Nifty or Sensex reaches a certain level.
- Fixed Date Trigger: Under this mutual funds are invested by fixing a specific date or time limit.
- Return base trigger: An investment is made if the value of the fund increases or decreases by a certain percentage.
- Profit Booking Trigger: If the fund's returns reach a certain level, profits can be booked or reinvested.
- Better for people like: Investors who are adept at predicting market direction and trends. Those who have high risk taking ability can also try it.
Image Credit: (Divya-Bhaskar): Images/graphics belong to (Divya-Bhaskar).
