In India, investments in mutual funds through systematic investment plan i.e. SIP are constantly increasing. By October 2024, the number of SIP wallets in the country will cross 10 crore. But not all SIPs are the same. There are mainly 5 types. By knowing them, you can guess which SIP is best for you based on your age and needs.
1. Regular SIP With this, you can invest in any mutual fund every month, every two months, quarterly, semi-annually or annually. You can also start this SIP online. The fixed amount is then debited from the investor’s account on the fixed date and automatically invested in the prescribed mutual fund. Investors can choose the investment interval, duration, amount and frequency 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 financial condition of the investor is good in any month, then he can increase the SIP amount and in case of financial difficulties, he can also reduce it. Compared to the classic SIP, the investor has more control over his investment. If necessary, you can also stop SIP for a while, which can be easily started later.
Who it’s best for: This is for investors whose income and expenses are uncertain or who may receive a large sum of money at any time. This method is best suited for freelancers, business owners or self-employed individuals as well as investors who want to take advantage of market fluctuations.
3. SIP intensified In this context, the amount of investment is increased regularly. Compounding gives more benefits as the investment amount increases. This allows you to raise a larger amount in the long term. The fall in the value of the rupee due to inflation can also be addressed.
Who is it for: For employees who receive raises every year or at regular intervals. Businessmen whose profits are increasing every year or investors who want to financially plan for home purchase, children’s education, retirement, etc.
4. SIP with insurance Many mutual fund companies offer such special offers. In it, one benefits from both the advantages of investment and insurance. Investors do not have to pay a separate premium for insurance coverage. In this context, the investor has the possibility of raising funds over a long period thanks to temporary insurance coverage.
In case of premature death of the investor during the SIP period, the nominee gets a fixed sum assured. Insurance coverage is generally low in the first few years, but gradually increases.
Who is it for: It is suitable for fixed income investors who want to accumulate a large corpus and also provide insurance cover 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 from the start.
5. Trigger SIP Under this, the investor invests in SIP based on a certain condition or trigger. In this, a fixed amount is invested every month at regular intervals. But this amount is only invested or triggered when a particular condition or level is formed in the market. Triggers can be of several types, such as…
Index Level Trigger: If Nifty or Sensex hits a particular level. Fixed Date Trigger: Under this, investment is made in mutual funds by fixing a particular date or time limit. Return base trigger: if the value of a fund reaches a fixed percentage. Profit reservation trigger: If a fund’s returns reach a certain level, profits can be reserved or reinvested. Suitable for: Investors who are experts in forecasting market direction and trends. Those with a higher risk appetite can also try it.