Exploring Different Types of SIP Investment

As the Indian Economy continues to make progress, opportunities for wealth creation are expanding, too. A lot of individuals now look towards SIP (Systematic Investment Plans) to achieve their financial goals. However, with different types of SIP available, it becomes quite intimidating to choose any of them. 
In this article, readers will get a chance to explore different SIP Investment options available for Indian investors and provide some insights about them.

What is an Systematic Investment Plan?

A SIP, a short form for a Systematic Investment Plan, it is a disciplined approach towards investing in mutual funds. It allows investors to invest a pre-decided fixed amount of funds at regular intervals, like every month, into any of their selected Mutual funds. 
Additionally, it offers numerous benefits like compounding, rupee cost averaging, and a diverse portfolio, which makes it a popular choice among investors to create long-term wealth. Further, there are different SIP facilities available for investors catering to specific needs that are discussed in the following section.

Different Types of SIPs and When to choose them?

Some of the different types of SIP plans available are discussed below.

1. Regular SIP

Regular SIPs are quite a common type of SIP among investors. Here investors need to invest a fixed amount of funds regularly for a certain period of investment. One can choose to invest weekly, monthly, quarterly or half-yearly or annually. This is one of the straightforward types of SIP, which only requires investors to be displaced to accumulate the target corpus. With small regular contributions, investors can gain huge.
 When to choose to invest in this type of SIP?

Investors can choose regular SIPs looking for a structured and hassle-free way to generate wealth over the long term while managing the market risks effectively. 

2. Flexible SIP

As the name explains, Flexible SIP gives investors complete flexibility in choosing the desired amount to invest. An investor can either decrease or increase investment amounts according to their financial conditions and cash flow needs. Overall, it enables investors to capitalise on various market opportunities by increasing their investment amount in favourable market conditions. 
 When to choose to invest in this type of SIP?
This type of SIP is ideal for investors with variable income streams due to irregular earnings, freelance projects, or seasonal work and when an investor has some uncertain timelines for financial goals.

3. Top UP SIP

A top-up SIP option allows investors to increase their SIP amount at pre-defined intervals.. The SIP top-up amount can be either a fixed amount or a percentage of the amount paid. Further, it provides investors with an option to capitalise on their expanding earning capacity. By increasing SIP contributions periodically, investors can align their savings and income levels. 

When to choose to invest in this type of SIP?
 
Investors who are expecting a rise in their income due to career growth, promotions, or business success can opt for a top-up sip, as it will allow them to accelerate their wealth accumulation. 

4. Trigger SIP

Trigger SIP for mutual funds based on their indices allows investors to move from one allocated scheme to another. During market scenarios, when it rises above or below the index, the Trigger SIP will automatically switch units from one designated scheme to another, within the Mutual Fund. Further, these triggers can be of two types: downside and upside triggers. 
When to choose to invest in this type of SIP?
An investor can choose to create trigger SIP if it wants to implement market timing strategies built using fundamental and technical analysis. Setting up triggers based on this would allow them to automate their investment decisions. 

5. Perpetual SIP

Perpetual SIP is a popular SIP option, giving investors the flexibility to continue their SIP investments indefinitely without defining an end date. It offers simplification and convenience for investors who like to follow a hands-off approach to investing. By using Perpetual SIP, one can automate their investment contributions without renewing SIP arrangements.  
When to choose to invest in this type of SIP?
It is an ideal choice for investors looking to achieve long-term financial goals like retirement planning, wealth creation, or an education fund for their children. Here are few tips for investing in SIP

Conclusion

In conclusion, there are different types of SIP that an investor can choose from in the Indian financial landscape to achieve their financial goals. As the Indian economy continues to evolve, SIPs have emerged as one of the prominent solutions for long-term wealth generation. Understanding the basics of SIP and its different types would lead investors to the way to a financially secure and prosperous future. To know about tax benefits SIP offer, read here - sip investment tax benefits

Frequently Asked Questions

1. How do I know which SIP is best to invest in?

Choosing the best SIP requires a few considerations, like risk tolerance, financial goals, investment funds, and personal preferences. Depending on this you can compare various funds and select one which aligns with all the factors. 

2. Which type of SIP is best for 5 years?

Determining SIP for 5 years highly depends on the risk appetite and investment preferences. However, one can consider investing in Regular SIPs and Perpetual SIPs for long-term investment plans. 

3. What is the safest investment with the highest return?

Finding the safest investment with the highest return is an oxymoron in the world of finance. This is because investments offering high returns also have a high level of risk. Ideally, investments with low returns are relatively safer. 

Disclaimers:
SIP investments does not guarantee of any profit/loss in an upward/declining market. Kotak Mahindra Asset Management Company Limited/Kotak Mutual Fund is not guaranteeing or promising any returns/future performances. 
Investors may consult their Financial Advisors and/or Tax advisors before making any investment decision. 
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY