Half of the people in India are not aware of the types of SIP, people are stuck in just one
SIP refers to Systematic Investment Plan (SIP) is an investment medium through which you can invest a fixed amount in mutual funds at regular intervals. This investment can be done on a monthly, quarterly, or weekly basis.
Types of SIP
SIP is a disciplined and convenient way of investing, which helps in achieving financial goals. Its variety and flexibility make it suitable for all types of investors. Choosing the right fund and regular investment over the long term makes SIP more beneficial. But, most people, or say half of the people of India do not know the types of SIP. They keep getting confused with the same name SIP. Let us know how many types of SIPs are there and what are their benefits.
What is SIP?
Systematic Investment Plan (SIP) is an investment vehicle through which you can invest a fixed amount in mutual funds at regular intervals. This investment can be made on a monthly, quarterly, or weekly basis. This is a disciplined and convenient way of investing, which is known to give good returns in the long run.
There are 6 types of SIP
Flexi SIP: In this, the investor gets the facility to increase or decrease his investment amount every month. This facility provides flexibility according to the income and expenses of the investor.
Top-up SIP: In this, the investor can increase his monthly SIP amount from time to time. This scheme is beneficial for those investors who want to invest more as their income increases.
Perpetual SIP: This is a SIP that does not have a fixed end time. The investor can continue it until he stops it manually.
Step-up SIP: In this, investors can choose to increase their SIP amount by a fixed percentage every year.
Goal-based SIP: It is designed for specific goals like buying a home, children’s education, or retirement.
Micro SIP: This is for those investors who want to start with a small amount. Under Micro SIP, investment can be started with an amount of Rs 500 or less. This is an excellent option for small investors and low-income groups.
Process of investing in SIP
Set a goal: First decide why you want to invest, like children’s education, buying a house, or retirement etc.
Select a mutual fund: Select a mutual fund based on your risk appetite and investment horizon.
Registration: The investor has to complete the KYC process. This requires Aadhaar card, PAN card and bank account details.
Decide the SIP amount and tenure: You have to decide how much amount and for how long you want to invest.
Set up automatic payments: Set up an auto-debit facility from your bank account to make investing easy every month.
Benefits of SIP
Rupee Cost Averaging: Helps to avoid market fluctuations. When the market is down, more units are purchased and when the market is up, fewer units are purchased.
Power of Compounding: Investment grows over the long term and the interest received on returns also increases the investment.
Investment Discipline: SIP helps in developing a disciplined investment habit.
Small investments, big profits: In this, investment can be started with a small amount, which can gradually turn into a big amount.
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