What Are the Different Types of Systematic Investment Plans?


SIPs have emerged as the most popular and sustainable form of Mutual Fund investing in modern India, and has young investors asking “What is SIP?”

There will be hardly any modern-day investor who wouldn’t have heard of SIPs. Now, although the percentage of people who still don’t know what SIPs are is quite low, the percent of people who know that this Mutual Fund method even has sub-types would be even lower.

In this article, we will be looking into the different SIP types. But before we head on there, let us first look at the reasons that have made SIPs a popular mode of investment.

The reasons that have made SIPs an investor’s favourite goes beyond ELSS tax shielding under Section 80C of the Income Tax Act, 1961. There are a number of associated benefits. Let us quickly glance through the primary ones before moving forward with the different types of SIPs.

Benefits of SIP Investment
  • Gives investors the freedom to add and withdraw money as they see fit
·  The hassle-free form of Mutual Funds investment starts at just Rs.500 per month
·  Rupee Cost Average functionality of SIP saves you from Market Volatility
·  It is probably the one and only type of Mutual Fund Investment which requires minimal to zero effort to set up

Types of SIPs

There are four types of Systematic Investment Plans that an investor can choose from. Let us look at what they are –

  1. Trigger SIPs

This SIP Investment type is ideal for those who have an in-depth understanding of how the market functions. In this Systematic Investment Plan type, the investors can set NAV, Event, Index Level, or simply a particular date for starting the SIP. This ‘trigger’ can have set instructions as to what function or action is performed on behalf of the investor. For example, an investor can set a trigger that says to sell units once the NAV hits a particular high number, or to buy units when the NAV crosses a certain low level.

Now among all the different SIP plans, this one is the least recommended because of the fact that it operates in a highly volatile market and promotes a lot of speculations.

This investment type comes in handy when the investor is looking to take advantage of some anticipated event. Suppose you know of any upcoming government policy which you believe will have an impact on the market, you can make the investment a week or month in advance to the advantage of the market.

  1. Perpetual SIPs

In the Perpetual SIP plan, the investors make the investment periodically in the mutual fund scheme for some predetermined tenure. When you sign up for SIP mandate, the choice of whether or not to set an end date lies with you.

In case the investor leaves the end date column blank, the investment type is considered a perpetual SIP. This SIP plan gives the investors the freedom to redeem the fund when their financial goal has been achieved.

  1. Flexible SIPs

This SIP plan gives the investors the option to increase or lower their SIP amount on the basis of their cash flow. Suppose you are facing a financial crunch, now using this plan, you can stop the payment for a few days/months.

On the other hand, you can even increase the amount of SIP if you have received a bonus. When you invest in the Flexible SIP plan, you will need to stipulate fixed investment amounts. It gives you the option to edit the amount of investment for a month, 7 days before the beginning of the date of the SIP.

  1. Top-up SIPs

The fourth and last type of SIP plans which plays an important part in the answer to ‘How to start SIP Investments’ are Top-up SIPs.

What happens in this Systematic Investment Plan type is that the investors are given the option to raise their SIP amounts at fixed intervals. The plans offer an advantage for the investors, as they get to invest in the mutual fund plans/schemes which are performing very well in the market.

Also, by raising the amount of investment at regular intervals, the investors get to develop a huge corpus, which brings them much nearer to achieving their financial goals.

So here were the four SIP plans that are prevalent in the Mutual Funds market today. Hope that you must have now gathered an understanding which you could now convert into a profitable investment. Also, before making an investment in any mutual fund investment, you can check your returns using an SIP calculator. This will help you to get a better idea of the returns on your investment and the investment tenure required to achieve your financial goals.