SIP Mutual Fund - Know The Types of SIP to Invest In

A Systematic Investment Plan, popularly known as SIP, allows the investors to invest in mutual funds in a disciplined manner. Through SIP, an investor can invest a fixed amount of money in a particular mutual fund periodically i.e. weekly, monthly, semi-annually, or annually.

• Systematic and disciplined investing The principle advantage of investing in mutual funds through SIP is that it allows you to make disciplined investments for a prolonged period of time. What you need to do is just sign up the SIP mandate form and a fixed amount will be deducted from your bank account on a fixed date every month. This money will be automatically invested in mutual funds.{2D743194-97C2-43F9-BC28-AEC370801ECD}
• Rupee cost averaging It’s nearly impossible to predict market movements. Even the experts can sometimes go wrong. Hence, for a novice investor, timing the market is a convoluted thing to do. So, the best option for them is to invest through SIP. With SIP, you’ll be investing on a fixed date every month, irrespective of the market scenario and hence, will gain advantage of the rupee cost averaging.
• Power of compounding The ‘Power of Compounding’ is believed to be the eight wonder of the world. By investing in mutual funds through SIP for a long period of time, you can create a large corpus, which can be double or even triple times the money invested by you. You may not see the results in a short period, but you have to keep investing and be patient to reap rich rewards with SIP.

• Perpetual SIP A perpetual SIP is the most common type of SIP used by maximum investors. It allows you to invest a fixed amount of money in mutual funds on a fixed date, every month. You can choose not to specify the end date while starting a perpetual SIP.
• Top-up SIP A top-up SIP allows you to increase your SIP amount at regular intervals of time. However, you need to remember that once you have increased your SIP amount, you cannot reduce it in future.
• Flexible SIP A flexible SIP allows you to increase or decrease your SIP amount as per your cash flow. So, if you’re facing a financial crunch, you can choose to decrease your SIP amount until the situation normalises. Similarly, if you’ve surplus money, you can increase your SIP amount to make more investments.
• Trigger SIP A trigger SIP is somewhat similar to investing a lump sum. It will allow you to time the market by triggering an investment into the funds. However, for that, you need to have proper understanding of the market.

You can choose the type of SIP as per your own requirement and preference. However, the objective should be to keep investing for a prolonged period of time, say at least 15 to 20 years. This way, you can take maximum advantage of the SIP mode of investment and will be able to create a huge corpus in future.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.