Various types of SIPs and how they can be helpful? 

Various types of SIPs and how they can be helpful? 

Written by Olivia, In finance, Published On
April 7, 2023

We all want to lead a good life after retirement or when we stop working. And, for this, 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 give you clarity on the investment tenure, amount, etc. which in turn helps, you to choose the relevant mutual funds. With meticulous financial planning, patience, and expert guidance, one can excel when it comes to 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 in turn 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 of SIPthat suits them, there are three main types to this:

Top Up SIP –

With a rise in 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 are aware that SIP means investing a fixed amount in a mutual fund in a systematic manner. But, what about the possibility to invest more when the markets are a at low level and less when the markets are at 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 to be invested as SIP based on the market levels.

Perpetual SIP –

Investors usually choose to invest in mutual fund schemes for a fixed period of time. This tenure can be for 6 months, 1 year, 3 years, 5 years or even more, based on your financial goal and the purpose of investment. 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 same, you can write to the AMC to stop the SIP. In case you have created the desired corpus and you want to withdraw it; you should first close the SIP and then redeem the entire amount. If you do not close the SIP, forthcoming installments will be deducted from your bank account.

Hence, to invest in SIP, one has these three primary options available. And, to calculate SIP returns, without the possibility of human errors, a SIP calculator can be used. This is an online financial tool that asks for some basic inputs such as amount, SIP investment tenure, the assumed rate of return, etc, to give the investor an estimate of their future corpus.

SIP calculator facilitates the process of investing in a SIP investment plan and helps mutual fund investors take through the process with clarity and transparency.

SIP return calculator can also be useful to plan a goal. To know how much to invest monthly in a mutual fund SIP to reach your goal, you need to 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.

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