How many types of SIPs are there? A systematic Investment Plan (SIP) is a gradual investment strategy for investing small amounts and building long-term wealth.
However, many people start saving without knowing the different types of SIPs and invest without clear goals.
Before starting an SIP, it is essential to consider various factors and choose the appropriate SIP. Now, let’s explore the different types of SIP.
1. Simple SIP: This is the most straightforward SIP method, designed to make investing a breeze. Investors can choose a systematic investment strategy on a monthly, bi-monthly, quarterly, half-yearly, or annual basis.
Daily and weekly SIPs are also available. The frequency, duration, and SIP amount must be specified at the beginning of the investment.
Once set, these parameters cannot be changed, although most people opt for monthly SIP, as experts also recommend this frequency.
2. Top-up SIP: This scheme allows investors to increase yearly investments. It is particularly beneficial for employees who receive an annual salary increment.
Also known as Step Up SIP, for example, an investor can opt for an Rs. 1000 annual step-up SIP, starting with Rs. 10,000. After 12 months, the monthly SIP will be Rs. 11,000; after 24 months, it will be Rs. 12,000, with the investments increasing yearly.
3. Flexi SIP: As the name suggests, this type of SIP is flexible for investors, putting them in control of their investment. It allows investors to pause, increase, or reduce their SIP amount based on their financial situation.
This flexibility makes it suitable for those who want to invest more when the markets are down and reduce their SIP when the markets are up.
4. Permanent SIP: For individuals still determining how long they want to continue their SIP, a permanent SIP allows the SIPs to continue until the fund house or fund manager is notified to discontinue them. The SIP amount can be redeemed in the future whenever the investor prefers.
5. Trigger SIP: This type of SIP is associated with some risk and requires market knowledge. It involves setting specific buying and selling conditions, which can lead to potential losses if not managed carefully. Only those familiar with the market should consider this option.
6. Multi SIP with different funds: Multi SIP allows investors to invest in multiple schemes a fund house offers through a single SIP, providing a sense of security and diversification. This is ideal for investors who want to spread their investment across different funds.
7. Insurance SIP: Some asset management companies offer insurance protection to investors opting for long-term investments, but please note that this feature is only available for equity mutual funds.