Investing in mutual funds through SIPs (Systematic Investment Plans) has grown rapidly in recent years. However, despite this popularity, most investors are familiar with only one type of SIP: the Monthly SIP. Did you know there are six types of SIPs? Understanding these can help you achieve higher returns on your mutual fund investments. It is essential to gain this knowledge, as investing in a SIP (SIP Update) without understanding its types may not be wise. Today, we will explain the six different types of SIPs to help you make informed investment decisions.
1. Regular SIP
Most investors opt for a Regular SIP. In this type, a fixed amount is invested at regular intervals, such as monthly, bi-monthly, quarterly, or half-yearly. The amount is automatically deducted from the investor’s account on a pre-selected date.
2. Perpetual SIP (Permanent SIP)
As the name suggests, a Perpetual SIP has no fixed end date. Investors can continue investing for as long as they wish. Most investors choose this for long-term goals, often extending up to 40 years. You can stop the SIP anytime. The main advantage of a Perpetual SIP is the power of long-term compounding, which significantly boosts investment growth.
3. Flexible SIP
Flexible SIPs allow investors to adjust the investment amount based on a pre-defined formula. For instance, you can invest a smaller amount when the market is performing well and a larger amount when the market dips. However, a minimum investment amount must be maintained at all times.
4. Triggered SIP
Triggered SIPs are initiated based on specific market conditions or events. For example, you can set up a SIP to invest whenever the stock market falls by 5% in a day. This approach helps you leverage market movements effectively but requires a thorough understanding of the stock market to succeed.
5. Top-Up SIP
A Top-Up SIP allows investors to increase their instalment amount periodically, depending on their financial situation. This is particularly useful when there’s an increase in income, a promotion, or a salary hike. Investors can enhance their SIP contributions by a fixed, additional amount as per their affordability (SIP Update).
6. Insurance SIP (SIP with Insurance)
An Insurance SIP (SIP Update) combines investment and insurance protection. Under this plan, investors are provided with term insurance coverage along with their SIP contributions. Many mutual fund houses offer insurance coverage up to 10 times the amount of the first SIP. The coverage increases over time as the investments grow.
Disclaimer:
The information provided in this article is for educational purposes only and should not be considered as financial or investment advice. The returns mentioned for the mutual fund schemes are based on past performance and are subject to market risks. Times Bull will not be responsible for any financial investments made, as it is entirely your responsibility. Please consult a financial advisor for better results.