Systematic investment planning refers to the method of allocating money in mutual funds in a pre-determined amount at different intervals. This approach helps increase financial discipline in the investor and provides them with the advantage of rupee cost averaging. Additionally, SIPs To Build A Strong Corpus for retirement years is also an emerging significant investment.

Systematic investment plans (SIPs) are beneficial for people of all income groups as they allow one to invest as low as Rs 100 to start with. Another advantage of SIPs is that they do not require the investor to open a dematerialized account.

SIPs are sought after as a preferred mode of investment by investors for both long-term and short-term investments. That’s how SIPs help To Build A Strong Corpus.

Types of SIPs

Here are the different types of SIPs to choose from.

Perpetual SIP

Perpetual SIP allows you to invest a pre-determined sum of money until you decide to stop the investment through a written application. Many people use this type of SIP, where they specify the amount of investment and the date of commencement only. The last date of investment is not required, but if one wishes to discontinue the investments, they can request the fund house or their bank to stop the same. If one does not fill the end date, the SIP becomes a perpetual SIP which has the maximum tenure of 30 years from the first investment.

Trigger SIP

Trigger SIP is recommended for more experienced investors who know more about the workings of the market. In trigger SIP, you can specify particular circumstances under which you wish to make the investment. For instance, you can direct that the bank can withdraw a certain amount from your bank to purchase units of your selected scheme only if the net asset value (NAV) of that scheme falls to a certain limit. If you are a hands-off type of investor with little to no knowledge about the market, then trigger SIP may not be suitable for you, as you need to have a risk appetite and also participate in the market yourself. Also note that the investment is entirely controlled by you and you are the solely responsible for your profit or loss.

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Step-Up SIP

Also known as top-up SIP, this allows you to increase the amount of investment periodically on a predetermined rate. For instance, you could instruct your bank to initially invest Rs 10,000 in a scheme for six months and increase the amount by 10 per cent. The bank will invest Rs 10,000 for the first block of six months, and on the second block, it will invest Rs 11,000 and continue to increase the investment as per your direction.

This is beneficial for employees expecting a raise as well as for those wishing to increase their investment little by little instead of increasing by a large sum.

Flexible SIP

Flexible SIP will help you navigate your investment through economic fluctuations. It allows you to reduce the investment amount in an economic crunch and also allows you to invest more in case of more disposable funds. The pre-decided formula regarding the market conditions provides the flexibility to change the amount of investment which other types of SIPs may not allow.