Systematic Investment Plan (SIP) helps the investor to invest with suitable intervals and with a minimum amount like that of Rs. 500. While people do know about the basics of SIP, still do not have full knowledge about other added benefits of SIP.
Investors investing in Mutual Funds know only one basic SIP, but for aligning to the financial needs of the investors fund houses have come up with different SIP plans. Let’s look at different SIP plans which are available in India.
Flexible SIP also known as Flex or Flexi SIP as the name suggests allows the investor to adjust SIP according to your financial situations and market fluctuations. With respect to market fluctuations, the SIP amount is decided by the predetermined formula, which enables the investor to invest more when the market is low and less amount when the market is high.
Similarly, for financial situations the investor can reduce or increase the amount according to the availability of disposable funds, like receiving a bonus. Therefore, the SIP amount here is flexible and can be adjusted according to the needs and wants of the investor.
Step-Up SIP allows the investor to increase the amount of SIP as and when instructed by the investor. For example, the investor says to increase the SIP amount after the first 4 months by Rs. 2,000 then if the first SIP installment is supposed to be Rs. 4,000 per month, then after 4 months the investor will pay Rs. 6,000 per month. Step-Up SIP can be a great option for investors who are expecting a raise in the income shortly.
Among the different types of SIP plans, Perpetual SIP is the most important plan as every investor has to make this decision of the start and end date of the Mutual Fund Scheme investment. While most of the investors fill out the start date, but fail to mention the end date.
Therefore, SIP with no end date turns into a Perpetual SIP which will run until 2099. But, the investors have the option to end the SIP by submitting a written application to the respective fund house. Therefore, if you wish to invest in SIP with a fixed tenure then do mention the end date for the same.
In this plan, investors are allowed to set triggers for your SIP investment. For example, the investor decides that the SIP amount will be withdrawn to invest in a particular scheme when the NAV will go down at a particular price which will be decided by the investor itself.
Investors also get the option of setting triggers in Nifty-fifty or Sensex, but it is always advisable by the experts to set triggers in these institutes only if the investors have a very thorough knowledge and are experienced in the investment world.
As discussed above there are various SIP plans for the investor to go forward with according to their financial needs and situations. The investor can very well go with a basic SIP plan but can try the above mentioned ones with proper research and knowledge and plans which align with the financial goals of the investors and thus can result in the expected results.