TYPES OF SIP (SYSTEMATIC INVESTMENT PLAN) IN MUTUAL FUNDs.
Systematic Investment Plan (SIP) has emerged as the most convenient and popular mode of investing in Mutual Fund Schemes. SIP has certain advantages which benefit investors in long run. It also encourages investors to start with a small amount to build a huge corpus over a period of time to meet their long-term financial needs.
FEATURES OF SIP OR TYPES OF SIP:
There is a different type of SIP which can suit the varied requirement of an investor. It offers flexibility in terms of Amount, Tenure and periodicity as per the financial condition of the individual investor.
The following are the type of SIP:
- Normal SIP
This is the most common type of SIP in which amount, tenure and periodicity are fixed. One cannot change the same afterward. If you want to change it you have to cancel the same and lodge a fresh mandate for SIP.
- Step up SIP
This enables you to increase the amount of SIP at Regular Intervals. When you are sure of increase in your income in near future, this will help you in investing more without going through the hassle of completing fresh formalities for increasing SIP.
3. FLEXI SIP
This enables you to adjust the amount of your SIP as per the available funds with you. This is suitable when your income is not certain. This gives you the flexibility to either increase or decrease of the amount as per your income.
- Trigger SIP
This enables you to set the trigger for investment based on happening of certain events like Reaching of Sensex to a certain level, increase in NAV (NET ASSET VALUE) etc. You may choose the date for investment as a trigger point. This helps in taking the advantage of certain happening which is going to positively impact the earnings.
This type of SIP is most suited to experienced and knowledgeable investors.
- Perpetual SIP
As the name suggests this type of SIP is for an indefinite period. There is no end date for this type of SIP. When you fill up SIP mandate form you have to leave blank end date column. In that case, MF will assume that your SIP will continue till 2099. This type of SIP enables you to continue investment uninterrupted for an indefinite period till your financial goal is achieved. You may redeem your fund as per your convenience.
- Pause SIP
Sometimes there may be financial crises and we may not be able to meet SIP instalment. In such eventuality, we may pause the SIP. Once the normalcy in financial position is restored we may again start SIP without going through the hassle of submitting fresh mandate. However one should try to avoid this as this disrupts your goal of wealth creation to achieve your financial needs. It is better to follow financial discipline and maintain buffer funds to meet such eventualities.