Various types of SIPs and how they can be helpful?
We all want to lead a good life after retirement or when we stop working. We need to start investing today and build wealth with time. When you start investing, ask yourself a simple question- ‘What is my financial goal?’
This will clarify the investment tenure, amount, etc., which in turn helps you choose the relevant mutual funds. With meticulous financial planning, patience, and expert guidance, one can excel in building a mutual fund investment corpus. In this process, the SIP investment plan can help. It enables you to invest a fixed amount at regular intervals in mutual fund schemes, which invest in the markets. It helps us build long-term wealth with the benefits of the power of compounding and rupee cost averaging.
Three Main Types Of SIPs
One can choose a type that suits them; there are three main types of this:
Top Up SIP –
With increased investor income over the years, one can increase the SIP amount through a simple top-up. For example, if you have been investing Rs. 2,000 in an equity mutual fund every month, you can increase your investment to Rs. 2,500 through the top-up facility. The top-up can be in percentage terms or rupee terms.
Flexible SIP –
We all know that SIP means investing a fixed amount in a mutual fund systematically. But what about the possibility of investing more when the markets are at a low level and less when the markets are at a high level? Flexible SIP is your friend in this case. In this case, the AMC will alter your monthly investments as per their algo, which checks the amount invested as SIP based on the market levels.
Perpetual SIP –
Investors usually choose to invest in mutual fund schemes for a fixed period. Based on your financial goal and investment purpose, this tenure can be for six months, one year, three years, five years or even more. But what if you don’t want to set an end date for your SIP investment? This is possible when you choose the perpetual option. In a perpetual SIP, your SIP investments can continue for as long as you wish, and if you want to discontinue the SIP, you can write to the AMC to stop it. If you have created the desired corpus and wish to withdraw it, you should close the SIP and redeem the entire amount. If you do not close the SIP, forthcoming instalments will be deducted from your bank account.
Hence, to invest in SIP, one has these three primary options. A SIP calculator can calculate SIP returns without possible human errors. This online financial tool asks for essential inputs, such as the amount, SIP investment tenure, the assumed rate of return, etc., to estimate the investor’s future corpus.
The SIP calculator facilitates investing in an SIP investment plan and helps mutual fund investors follow the process with clarity and transparency.
A SIP return calculator can also be helpful when planning a goal. To know how much to invest monthly in a mutual fund SIP to reach your goal, you must enter the goal amount, the time after which you need the goal money, and the expected return from your SIP investment. Once you have entered these details, the SIP calculator will display the monthly SIP amount. You can start the SIP and continue till the goal time.
