Category : New to Investing December 30, 20245 minutes read
Investors often seek opportunities that offer a blend of stability and growth, and this is where Systematic Investment Plans (SIPs) shine. From the potential for generating high returns to tax benefits, SIPs provide a strategic approach to wealth creation. In this guide, we will explore what is a Systematic Investment plan or SIP, the various types of SIPs, including
- Regular SIP
- Top-up SIP
- Flexible SIP
- Trigger SIP
- Perpetual SIP
- Multiple SIP
- SIP with Insurance
Introduction
For your investments to work for you, you must be consistent with your investments and align them with your goals. That’s where Systematic Investment Plans come in – they help you automate your investments every month and come in various types to meet your financial goals.
But what is a Systematic Investment Plan? An SIP in mutual funds is a disciplined investment strategy where individuals can invest regularly in a variety of mutual funds. With its strategic investment methodology, SIPs not only provide flexibility and diverse options but may also potentially deliver returns in the long term. There are different types of SIPs you can invest in for different goals.
The mechanism behind how SIP works is rooted in disciplined investing, where you may benefit from rupee-cost averaging and the power of compounding. Moreover, using SIP for tax benefits can unveil additional advantages, making it a comprehensive strategy for wealth creation in the long term.
There are various types of SIP in funds, each catering to different risk profiles. SIPs in large-cap may be suitable for relatively conservative investors. Contrarily, SIPs in small-cap funds may be suitable for aggressive investors. SIPs in mid cap funds may be suitable for investors seeking potential balanced growth, and tax-saving SIPs for those seeking dual benefits of investing via SIP for tax-saving and wealth creation. In this guide, we will be covering the diverse types of SIPs, including regular SIPs, top-up SIPs, and trigger SIPs, allowing investors to tailor their portfolios to align with specific financial goals, further enhancing the overall benefits of SIP investment. Whether you are drawn to the perpetual commitment of perpetual SIPs or wish to decipher the meaning of top-up SIPs, trigger SIPs or more, by understanding the different types of SIPs you may be able to make more informed decisions that are aligned with your financial goals.
Delving into the world of wealth creation, a question that is often posed is, what is a Systematic Investment Plan (SIP) in mutual funds? Among the different types of SIPs available in the market, a regular Systematic Investment Plan (SIP) is a disciplined investment approach where investors contribute a fixed amount at regular intervals, typically monthly, into mutual funds. This systematic process harnesses the power of compounding and rupee-cost averaging, making it an effective tool for wealth creation in the long term.
Who Should Choose Regular SIP?
Regular SIPs are characterised by periodic investments of a specific amount.
Investors with a clear understanding about their financial goals and investment horizon may potentially benefit from regular SIPs. Beginner investors seeking a long-term investment may prefer this option.
Investors seeking potentially higher returns than fixed deposits, and a hassle-free, long-term investment strategy should consider regular SIPs. Moreover, SIPs in ELSS funds have tax benefits, making them suitable for investors looking to save tax. This method may minimise risk, suit various financial goals, and align with the principle of ‘set and forget’ for optimal results in mutual fund investments.
Start a regular SIP and gain the potential benefits of compounding in the long-run!
A regular SIP may offer the potential for a high return on SIP investments. In a regular SIP, investors contribute a regular amount of money at regular intervals, usually monthly. Investors may benefit from the positive outcomes of compounding and rupee cost averaging.
As we delve into the different types of SIPs, top-up SIPs are one option that allows investors to systematically increase their investment amounts over time, potentially enhancing the overall portfolio performance. The meaning of top-up SIP is gradually increasing your SIP investment amount over time. It gives you the flexibility to add more funds, potentially increasing your overall returns.
Who Should Choose Top-Up SIP?
Top up SIP may be a suitable investment for salaried individuals getting regular increments or bonuses. They can continue to invest a sum of their income despite periodic changes in their income. Investors aiming for incremental wealth creation and those expecting increased income in the future should consider top-up SIP. Among the various types of SIP plans, top-up SIP aligns with evolving financial goals and provides flexibility.
Flexible SIP, also known as step-up SIP, allows investors to increase or decrease their SIP amount as per their financial circumstances. These financial circumstances may be related to changes in personal finance, future goals or they may be due to larger, macroeconomic changes.
Who Should Choose Flexible SIP?
Investors seeking adaptive and personalised investment strategies may opt for flexible SIP. Among the various types of SIP plans, flexible SIP aligns with dynamic financial needs, providing the agility to adjust contributions and optimise potential returns over time.
Experienced investors who study market conditions regularly may potentially benefit from flexible SIPs as they can adjust their investments as per market conditions.
Investors without a steady source of income may potentially benefit from flexible SIPs as they can alter their investment amount as per their current financial situation.
Make periodic investments and save for the future by starting an SIP with Bandhan Mutual Fund.
Flexible SIP allows investors to adjust their contributions based on personal or macroeconomic changes, offering adaptability. It's suitable for experienced investors or those with fluctuating incomes, seeking personalized investment strategies.
Trigger SIP is a type of SIP investment in which AMCs set predefined conditions to automatically adjust their SIP amounts based on market movements.
Suppose an investor starts with a monthly SIP of ₹5,000. They set a trigger that, if the fund’s NAV (Net Asset Value) increases by a certain percentage, its SIP amount will automatically increase. If the fund, with an annualised return of 8.17%, performs well, triggering an increase in SIP amount can potentially enhance returns during bullish phases.
Who Should Choose Booster SIP?
Among the various types of SIP, booster SIPs may suit investors who want to capitalise on market trends and adjust their investments accordingly. Investors with a keen interest in market movements and a desire to dynamically manage their SIP contributions could consider booster SIP. It may offer a responsive and strategic approach to potentially capitalise on favourable market conditions.
Start a booster SIP with Bandhan Mutual Fund to potentially capitalise on market movements!
Trigger SIP automatically adjusts investments based on predefined market conditions, helping to capitalize on market movements. It may be suitable for investors who want to dynamically manage contributions and take advantage of favorable market trends.
Perpetual SIP, also known as an evergreen SIP, is a continuous investment plan without a predetermined end date.
For instance, an investor starts a perpetual SIP with a minimum investment of ₹1,000. Over the course of three years, the investor witnesses the fund’s consistent performance and can reap the benefits of rupee-cost averaging and compounding.
Who Should Choose Perpetual SIP?
This perpetual SIP is well-suited for investors seeking the potential for high returns with reduced risk, as the evergreen nature accommodates market fluctuations and aligns with their long-term financial goals, making it an exemplary choice among various types of SIP.
Investors without a specific goal or tenure may potentially choose the perpetual SIP option. Investors can stay invested as long as they need and redeem investments when required.
This may be a liquid SIP option and thus, it may be suitable for investors seeking a liquid investment.
Multi SIP involves investing in multiple mutual funds simultaneously, spreading the investment across various schemes to diversify risk.
Who Should Choose Multi SIP?
Multi-SIP strategy offers a balanced approach, and may leverage the potential stability of funds such as debt funs with the growth potential of equity funds, making it suitable for investors seeking both stability and returns.
SIP with insurance integrates mutual fund investments with an insurance cover, potentially providing financial protection to the investor.
It not only offers potential returns but also life insurance coverage. In the unfortunate event of the investor’s demise during the policy term, the insurance cover provides financial support to the nominee
Who Should Choose SIP with Insurance?
Among the various types of SIP, SIP with insurance is suitable for individuals looking for a combined investment and insurance solution. It caters to those who prioritise wealth creation while ensuring financial security for their loved ones. This innovative approach aligns with various financial goals, providing a comprehensive investment and protection strategy.
Learn more about the types of investors!
- Systematic Investment Plans (SIPs) in mutual funds offer a dynamic approach to wealth creation in the long term.
- With options like regular SIP, top-up SIP, flexible SIP, trigger SIP, perpetual SIP, multi SIP and SIP with insurance, investors can tailor their strategies to achieve potentially high returns on their SIP investment.
- The benefits of investing in SIPs range from combining flexibility and long-term wealth creation to higher tax benefits.
- There are diverse types of SIP funds, catering to a spectrum of risk profiles. SIPs in small-cap funds, SIPs in mid-cap funds and SIPs in large-cap funds have varying levels of risk. Additionally, individuals looking for tax advantages can explore tax-saving SIPs. As a result, SIPs are a versatile investment option.
- As investors navigate the benefits of SIPs, the perpetual nature of some SIPs, like evergreen SIPs, emerges as a key consideration.
- As investors weigh the risk in SIP investment against its potential benefits, the SIP landscape emerges as a dynamic and responsive option for diverse financial goals, including using SIP for tax benefit.
- Whether it’s aiming for potential returns or tax-saving advantages, SIPs present a versatile and potentially effective way of investing for wealth creation, offering a path to potentially meet your financial goals.
