Business & Economy

Want To Make The Most of SIP Investment?

5 Types of Systematic Investment Plans Which Will Boost Your Returns

By A Correspondent

Mumbai, August 15, 2020

It’s very important to have adequate financial planning to create a financial cushion for your future. One of the best options to achieve financial independence is through investments in mutual funds through SIP, or commonly known as Systematic Investment Plan. A lot of investors invest in SIP for the financial discipline it offers to users. Owing to varying interests of different investors, there are several types of SIPs offered by AMC. They are:

1. Top-up SIP

Under this SIP, the first instalment is fixed, and incremental amount and frequency of the increment are pre-decided, so investment amount automatically increases at regular intervals. For instance, Smita wants to save money for her dream vacation home in 20 years. She decides to start an SIP in an equity mutual fund. Let’s assume she invests Rs 5000 each month in a mutual fund scheme with an average rate of returns at 12% p.a.

On completion of 20 years, Smita would have reached a corpus of Rs45.5 lakh. However, if Smita had topped up her SIP investment by 10% each year, she could reach this corpus of Rs 45.5 lakh in less than 16 years. That means that her goal could be achieved 4 years earlier if she had increased her SIP contribution by just 10% every year.

2. Flexi SIP

The investor fixes the first instalment and the subsequent instalments are calculated according to a formula to invest more money when markets are low and less money when markets are high. Under this type of SIP, an investor has to specify a default amount for their SIP investments. An investor also has the option to change the SIP amount for a particular month seven days prior to the SIP’s date. If the SIP amount is untouched, the default amount selected would be invested in the specified mutual fund scheme

3. Perpetual SIP

Under this SIP, there is no end date of the investment tenure. However, the investor has an option to redeem the fund at any time. At the time of signing up an SIP mandate, an investor has the option to leave the end-date option column blank. If the column is blank, it is assumed that the investor has opted for a perpetual SIP. An investor should cautiously opt for this mode of investment as it also requires them to monitor their funds’ performance every now and then.

4. Trigger SIP

Under trigger SIP investment, investors can redeem a part or entire amount of their investment. They can also automatically switch to another mutual fund scheme as soon as the amount reaches a pre-determined trigger point. This trigger can be set for both upside and downside events. Trigger SIP method is beneficial to those investors who have a good understanding of the financial market and the market volatility.

You can also use a mutual funds SIP calculator to calculate the returns on your investments.

This SIP return calculator is quite popular among investors as it helps to project the future value of their investments. Use an SIP calculator to determine the monthly amount needed to build a corpus. Happy investing!

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