Mutual Funds Research

Different Versions of SIP that you must know

Yes, The 8th wonder of world - Systematic Investment Plan that is SIP.

Different Versions of SIPs or Types of SIPs in the Mutual Funds

Over the decades and centuries, Humans have witnessed many wonders on this planet. however, if one try to look around these wonders, each of one are related to some sculpture or monuments. But what if we say, we have found another wonder of this plant?

Yes, The 8th wonder of world - Systematic Investment Plan that is SIP. Well, this is not an officially registered anywhere. But something that can improve your personal life then it won't be incorrect to consider wonder anymore.

SIP - a powerful facility

In the investment era, SIP is one of a powerful facility which works in accordance to fulfill our financial needs like a miracle. This facility provides an edge to investors, to build their wealth smartly and hassle free.

In simple words, SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme. however, The fixed amount of money can be as low as Rs. 500, while the pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis. 

Different version of SIPs

Everything has something called version, either it is Cars, Mobile phone or any Gadgets. Similarly, There are also some other SIP types which has transformed from traditional to modern. Lets Discuss in detail.

Versions of SIPs or Types of SIPs
Different version of SIPs

Detailed Explanations on different versions of SIP

(i) Flexible SIP

As this version clearly explaining itself the term "Flexible SIP" that means investors has flexibility to investing any amount.

Basically, a flexible Systematic Investment Plan is very similar to a regular SIP. However, the only difference between the two is with the investment amount. In a flexi plan, an investor can change the amount of contribution that they wanted to invest at any point of time.

Flexi SIPs give you more investment discretion than a conventional plan because they let you adjust the investment amount.

When one can opt for this type of SIP? 

An investor whose income is not fixed or irregular due to any reason. Those investor can go forward with flexible SIP. Therefore, the investors can adjust their investment in accordance with market turmoil or vice versa.

(ii) Step-up SIP

Step-up SIP is an another updated version of normal or conventional SIP. Step up Sip is the amount of investment increases at a pre-defined rate and period.

we all know, most professional's or services persons salary As salary of increases by a certain percentage every years so it would be a wise decision to increase your SIP by same percentage every year. Through this technique, an investor will get an additional opportunity to grow their investment.

(iii) Perpetual SIP 

Prior the occurrence of perpetual SIP, earlier there were some backlogs related to SIP investments.

In Mutual funds, when an investor used to invest through SIPs, then after some period of time the SIP tends to stopped automatically because of certain pre-decided periods (such as Apr 15- Mar 20).

Due to this automatic stoppage without even intimation, this affected many of us portfolios to generate more compounding. Therefore, to address this problem, Perpetual SIP was introduced.

(iv) SIP with free insurance

SIP with free insurance is nothing but an additional facility provides by some mutual fund houses to only equity mutual funds..

There are several mutual funds such as Birla Sunlife, ICICI Pru and Reliance Mutual Fund that provide free Group Term insurance cover of 10 times the monthly SIP instalment during the first year.

Generally, The cover will increase to 50 times during 2nd years and to 100 times (120 times for Reliance) from the third year onwards subject to maximum cover of Rs. 20 lakhs (Rs. 21 lakh for Reliance) per investor across all folios and schemes. However, Performance of the fund is in no way influenced by this add-on.

Note : This cover is only for those are under 55 years old. However, Exit load under this schemes is generally higher than the versions of same schemes without the insurance cover. For Example: Reliance charges an Exit load of 2% if you redeem your investment before you turn 55.

(v) Trigger SIP

A person, who is experienced about market and aware about market volatility and huge knowledge about financial market. He can choose trigger sip because of all information you can set your target of NAV, market index level, any specific event, date or other information.

Like if you know about global market gold price is decreasing than their impact on oil companies, any government policy which impact on market index level.

But it’s always better to invest your money for long term in mutual fund to achieve your financial target, so you should have to avoided trigger sip because it’s risky and incites speculation.

(vi) Pause SIP

In this type of SIP a facility is provide to investor to put on hold his payment of sip for a particular time period without cancellation of sip.

This temporary period of holding is from one month to three months. And its again restart after completion of pause period automatically.

It is beneficial when someone facing financial crises and its difficult for him to make sip investment.

Drop us your query at – info@pawealth.in or Visit pawealth.in

References: Updates from Mutual Fund Companies.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be consider a recommendation for buying/selling any stock. Thus the report & references mentioned are only for the information of the readers about the industry state.

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