Mutual Funds: What are Different Types of SIPs, Which One to Choose?

A systematic investment plan (SIP) continues to remain an ideal means for investments. There are seven different types of SIPs, which an individual can choose based on their investment goals and financial positions. 

1. Regular SIP: 

Being the simplest SIP type, an investor invests a fixed amount at frequencies of monthly, bi-monthly, quarterly, half-yearly, daily, or weekly basis. However, an investor cannot change the SIP amount during the investment tenure in a regular SIP.

An individual kickstarting their stock market journey can opt to invest in a regular SIP. At the same time, if an investor is clear with the investment tenure and financial goals, then they can opt to invest in such a SIP.

2. Flexible SIP: 

As the name suggests, an investor has the option to alter the investment amount. It is possible for an investor to adjust their SIP amounts based on the market or their financial conditions.

An investor looking forward to having better control over the SIP by being able to adjust their investment in accordance with the market movement can opt for a flexible SIP. For example, one can increase their contribution when the markets are experiencing an upturn and decrease it when the markets show a downturn. 

Also, an individual who may not have a steady source of income can go in for a flexible SIP.

3. Multi SIP: 

Such a type of SIP allows an investor to invest in various mutual fund schemes via a single SIP. An individual looking for a diversified portfolio can go for multi-SIP as it helps to minimise the impact of underperforming security on the overall investment portfolio.

4. Perpetual SIP: 

When one does not select the investment tenure, the SIP becomes a perpetual SIP. To stop investing, an individual has to inform the fund house well in advance. This type of SIP investment is handy for gauging mutual fund returns of 10 years or more.

An investor not focused on any specific goal or tenure can opt for a perpetual SIP. This SIP allows one to stay invested as long as they wish to and provides the power to redeem the investments whenever an individual deems fit.

5. SIP with Insurance: 

In the case of long-term investments, a few fund houses also offer insurance coverage. However, this particular feature is available for equity mutual funds alone. Going for a SIP with insurance is totally at the discretion of an investor. Individuals can opt for it if they don’t have insurance coverage or generally have a low-risk appetite.

6. Top-up or Step-up SIP: 

In this particular SIP, investors can raise their SIP amounts periodically. It is possible to step up SIP plans in multiples of Rs 500.

Salaried individuals who get regular yearly or half-yearly increments can opt for top-up SIP. In addition, step-up SIP may be an ideal option for individuals who have just started working. One can start with a small initial investment and increase after receiving an increment on a yearly basis.

7. Trigger SIP: 

Trigger SIPs are for the more knowledgeable persons who can manipulate their SIPs according to various market conditions. This type of SIP is only suitable for an investor who possesses exceptional levels of market awareness and expertise in market dynamics.

Lastly, it is important to know that when it comes to investments, there is no one-size-fits-all condition. Investors should consider their financial goals, income flow, and risk appetite.