In India, investment in mutual funds through Systematic Investment Plan i.e. SIP is continuously increasing. By October 2024, the number of SIP portfolios in the country will exceed 10 crore. But not all SIPs are the same. These are mainly of 5 types. By knowing about these, 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. After this, the fixed amount is debited from the investor's account on the fixed date and automatically invested in the prescribed mutual fund scheme. Investors can choose the investment interval, tenure, amount and frequency at the beginning itself. 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 financial condition of the investor is good in any month, then he can increase the SIP amount and if there is any financial difficulty, he can also reduce the amount. In comparison to regular SIP, the investor has more control over his investment. If needed, you can also stop SIP for some time, which can be easily started later.
Which people are better for: It is for investors whose income and expenses are uncertain or who may have a large amount of money coming in at any time. This method is better for freelancers, business owners or self-employed as well as 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 raising a larger amount in the long run. The decline in the value of rupee due to inflation can also be dealt with.
For whom is it better: For employees who get increments every year or at regular intervals. Those businessmen whose profits increase every year or investors who want to do financial planning for buying a house, children's education, retirement etc.
4. SIP with Insurance Many mutual fund companies offer such special offers. In this one gets the benefits of both investment and insurance. Investors do not have to pay any separate premium for insurance cover. Under this, the investor gets an opportunity to collect funds over a long period with term insurance coverage.
In case of untimely death of the investor during the SIP period, the nominee gets a fixed sum assured. Insurance cover is usually low in the initial years, but gradually increases.
Which people are better for: It is good for investors with fixed income who want to accumulate a larger corpus 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, the investor invests in SIP on the basis of a certain condition or trigger. In this, a fixed amount is invested every month at regular intervals. But this amount is invested or triggered only when a particular 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 particular level.
- Fix Date Trigger: Under this, investment is made in mutual funds by setting a particular date or time limit.
- Return Base Trigger: If the value of a fund increases or decreases by a certain percentage, then investment is made in it.
- Profit Booking Trigger: If a fund's returns reach a certain level, profits can be booked or reinvested.
- For whom is it better: Investors who are adept at predicting market direction and trends. Those who have higher risk appetite can also try it.
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