SIP Investment: 10 types of SIPs you need to know about
Association of Mutual Funds in India (AMFI) on Tuesday (July 9, 2024) reported a record jump in SIP contributions. For June 2024, SIP contribution stood at an all-time high of Rs 21,262.22 crore. It was ahead of the SIP contribution of Rs 20,904.37 crore in May 2024.
Other than that, the number of new SIPs registered in June 2024 was 55,12,962. The SIP AUM also turned out to be the highest ever in June, at Rs 12,43,791.71 crores against Rs 11,52,801 crores in May 2024.
The number of SIP accounts stood at its highest ever at 8,98,66,962 in June 2024, as compared to 8,75,89,485 in May 2024.
Even as the number of SIPs keeps growing every month and AMFI data validates it time and again, there is not much awareness about different types of SIPs.
The majority of people know only about regular SIPs, where one invests a fixed amount at regular intervals.
The other common SIP type is step-up SIP, where you increase the amount every season/year.
But there are many types of SIPs. Here we discuss 10 types of them.
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Regular SIP
In a regular SIP, you invest a fixed amount at regular intervals. It can be daily, bimonthly, monthly, quarterly, or yearly. The SIP made every interval helps in cost-averaging regardless of the market's performance. It may be an effective tool to get good returns in the long run.
Step-up SIP
In this SIP, you start with a particular amount and increase the amount by a few per cent every year. Since you increase the amount, your corpus in the long run can be much larger than when you don't step up your SIP.
Top-up SIP
The SIP allows for additional investments over and above the regular SIP amount, helping the investor take advantage of market dips or extra funds.
Multi SIP
In a multi SIP, you don't need to invest in different schemes of a fund separately. You can invest in all schemes with a single SIP. The fund house will allot money into different SIPs as per your instructions.
Perpetual SIP
This is almost the same as a regular SIP, but here the investment period is not predefined. One keeps investing until they ask the fund house to stop it.
Flexible SIP
This works in two ways. An investor can either increase the amount or frequency of the SIP. The SIP allows you to increase or decrease the amount of SIP. An investor can choose a lesser amount if the market is faring poorly and can increase the amount if the market is going through a good phase. However, in either case, one needs to intimate their fund house two weeks prior to it.
Trigger SIP
In this type of SIP, the amount is automatically invested whenever a specific market index or net asset value (NAV) reaches a particular level. But this SIP is considered a good option with strong knowledge of the market.
SIP with STP (Systematic Transfer Plan)
You invest in a lump sum amount in one scheme of a mutual fund and transfer SIP money from it to other schemes of the same fund house to optimise returns or reduce risk.
SIP with Insurance
This SIP combines your investments with life insurance coverage. If you die while making SIPs in the mutual fund, your nominee gets the insurance cover. The cover amount depends on your SIP contributions.
Smart SIP
In this SIP, advanced algorithms and market analysis are used to optimise investment amounts and timing. Here, you buy and sell NAVs to beat market risks. You buy equity fund units when the prices are fair and sell them when you get good gains. During overpricing of equity assets, you park you money debt funds.