January 10, 2024

Types Of SIP

Types Of SIP

There are mainly 7 types of SIP: Regular SIP, Top-up SIP, Flexible SIP, Perpetual SIP, Trigger SIP, SIP with Insurance, Multi SIP. 

Different types of SIP are designed to meet the requirements of diverse preferences of investors and one should choose the type of SIP that aligns with their financial objective. 

Table comparing all aforementioned SIP types in brief

Type of SIPDefinitionBenefitsDrawbacks
Regular SIPA fixed amount invested at regular intervalsDisciplined approach to investing, rupee cost averagingNo flexibility in changing investment amount
Top-up SIPA regular SIP with provision to increase investment amountAllows investors to increase investment as per their capacityMay lead to overinvestment in case of fluctuating markets
Flexible SIPAn SIP where investors can increase, decrease or pause investmentOffers flexibility in investment amount based on market conditionsInvestors may miss out on long-term gains due to market timing
Perpetual SIPAn SIP without an end dateOffers long-term investment opportunity with ease of investmentInvestors may forget to monitor and rebalance their portfolio
Trigger SIPAn SIP where investments are triggered based on market conditionsProvides the opportunity to invest at opportune momentsMay lead to missed opportunities if the triggers are not set appropriately
SIP with InsuranceAn SIP that provides insurance coverage along with investmentProvides both investment and insurance benefits in one planInsurance coverage may be limited and not adequate for all investors
Multi SIPAn SIP that allows investment in multiple funds simultaneouslyOffers diversification and flexibility in investmentRequires more research and monitoring of multiple funds

This article covers: 

What is SIP in Mutual fund?

SIP full form in mutual fund is Systematic Investment Plan, which is a simple and convenient way to invest a fixed amount of money regularly, typically monthly, in a mutual fund scheme. SIP in mutual funds allows investors to invest in a disciplined and structured manner. The beauty of SIP is that it provides an opportunity for small investors to participate in the stock market and build wealth over time.

Investing in SIP is relatively simple and can be done online or offline. All you need to do is select a mutual fund scheme, choose the SIP date, and authorize the investment. You can start investing in SIPs with as little as Rs. 500 per month, making it an affordable investment option for everyone.

Types of Funds in SIP

There are mainly 7 types of SIPs- regular SIP, top-up SIP, flexible SIP, perpetual SIP, trigger SIP, SIP with insurance and multi SIP. 

1. Regular SIP

Regular SIP is the most common type of SIP, where investors invest a fixed amount of money at regular intervals, usually monthly, for a predefined period. Regular SIPs are suitable for long-term investors looking for steady wealth creation over time. Some key features of regular SIPs are:

  • Fixed investment amount and tenure
  • Suitable for long-term investment goals
  • Can be started with a small amount
  • Offers the benefits of compounding and rupee-cost averaging

Example: Investing Rs. 5,000 per month in a mutual fund scheme for a period of 10 years.

2. Top-up SIP

Top-up SIP is a variant of the regular SIP where investors have the flexibility to increase their investment amount at predefined intervals. It is an ideal option for investors looking to increase their investment amount with a rise in their income. Some key features of top-up SIPs are:

  • Offers flexibility to increase investment amount
  • Suitable for investors with rising income
  • Helps in achieving financial goals faster
  • Offers the benefits of compounding and rupee-cost averaging

Example: Starting a regular SIP of Rs. 5,000 per month, with a 10% top-up every year.

3. Flexible SIP

Flexible SIP is a variant of the regular SIP where investors have the flexibility to change their investment amount and frequency as per their convenience. It is an ideal option for investors with fluctuating income or those looking to invest surplus money. Some key features of flexible SIPs are:

  • Offers flexibility to change investment amount and frequency
  • Suitable for investors with fluctuating income or surplus funds
  • Can help in achieving financial goals faster
  • Offers the benefits of compounding and rupee-cost averaging

Example: Starting a flexible SIP with a monthly investment amount of Rs. 5,000, and the option to increase or decrease the amount as per convenience.

4. Perpetual SIP

Perpetual SIP is a variant of the regular SIP where investors can invest a fixed amount of money at regular intervals for an indefinite period. It is an ideal option for long-term investors looking for a steady income stream post-retirement. Some key features of perpetual SIPs are:

  • Offers the option to invest for an indefinite period
  • Suitable for investors looking for a steady income post-retirement
  • Offers the benefits of compounding and rupee-cost averaging

Example: Starting a perpetual SIP of Rs. 10,000 per month to create a steady income stream post-retirement.

5. Trigger SIP

Trigger SIP is a variant of the regular SIP where investors can set triggers for investment, based on market conditions. It is an ideal option for investors looking to capitalize on market opportunities. Some key features of trigger SIPs are:

  • Offers the option to invest based on market triggers
  • Suitable for investors looking to capitalize on market opportunities
  • Offers the benefits of compounding and rupee-cost averaging

Example: Investing Rs. 10,000 in a mutual fund scheme when the market falls by a certain percentage.

6. SIP with Insurance 

SIP with Insurance offers the benefits of both worlds by providing investment returns along with life insurance coverage to investors. It provides financial security to the investor’s family in case of any unfortunate event.

Here are some key features of SIP with Insurance:

  • SIP with Insurance offers insurance coverage to investors, which ensures financial protection for their families in case of an unfortunate event.
  • Investors can avail of tax benefits under Section 80C of the Income Tax Act for the premium paid towards the insurance coverage.
  • Investors can choose the amount of insurance coverage as per their requirements and can also choose the tenure of the policy.

Example: HDFC Life offers a plan called HDFC Life Click 2 Wealth, which is a market-linked plan that offers life insurance coverage and mutual fund investment options through a single plan. The policyholders can select from various investment options like equity, debt, or balanced funds based on their risk appetite and investment goals.

7. Multi SIP

Multi SIP is a type of SIP that allows investors to invest in multiple mutual fund schemes through a single SIP account. It is an ideal option for investors who want to diversify their investment portfolio across different mutual fund schemes. Some key features of Multi SIP are:

  • Multi SIP allows investors to diversify their investment portfolio by investing in multiple mutual fund schemes through a single SIP account. This helps in reducing the overall risk of the investment portfolio.
  • Investors can choose to invest in multiple mutual fund schemes based on their investment goals, risk appetite, and investment horizon.
  • Multi SIP offers convenience to investors by enabling them to manage their investments in multiple mutual fund schemes through a single SIP account.

Example: Axis Mutual Fund offers a Multi Cap Fund that allows investors to invest in multiple equity and equity-related instruments through a single SIP account. The fund invests across large-cap, mid-cap, and small-cap companies, which helps in diversifying the investment portfolio and generating better returns over the long term.

Top SIP Plans for Investors in India

SIPs are becoming increasingly popular among investors in India due to their low-risk nature and the potential for high returns. Let’s have a look at the top SIP plans for investors in India:

SIP PlanFund HouseInception DateAUM (Cr)1-Year Return3-Year Return5-Year Return
HDFC Equity FundHDFC Mutual Fund34700275170.64760.26460.1825
Mirae Asset Large Cap FundMirae Asset Mutual Fund39539233030.69140.21570.1548
SBI Bluechip FundSBI Mutual Fund38749276190.57190.18650.137
Aditya Birla Sun Life Frontline Equity FundAditya Birla Sun Life Mutual Fund37469280150.60520.19670.1361
Axis Bluechip FundAxis Mutual Fund40179211310.57130.21220.1503

Note: The data in this table is as of September 2021 and subject to change. This is just an indicative comparison and should not be the only factor for selecting a SIP plan. Investors should conduct their own research and consult with a financial advisor before investing in any SIP plan.

Do you want to expand your knowledge about mutual funds? We’ve got a list of must-read blogs that will help you do just that. Just click on the articles to find out more.

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Types Of SIP- Quick Summary

  • There are various types of SIPs available in the market that cater to different investment needs and goals which includes Fixed SIP, Top-up SIP, Flexible SIP, Perpetual SIP, Trigger SIP, etc.
  • SIP is a systematic investment plan that allows investors to invest small amounts of money regularly in mutual funds.
  • Regular SIP is the most common type of SIP where investors invest a fixed amount of money at regular intervals.
  • Top-up SIP allows investors to increase the amount of their SIP investment periodically with this type of SIP.
  • Flexible SIP allows investors to change the amount and frequency of their SIP investments as per their convenience.
  • Perpetual SIP is an open-ended SIP that does not have a fixed investment tenure.
  • Trigger SIP allows investors to invest in mutual funds based on predetermined market triggers.
  • SIP with Insurance is a type of SIP that offers life insurance coverage to investors along with mutual fund investments.
  • Multi SIP allows investors to invest in multiple mutual funds simultaneously through a single SIP account.
  • Top SIP Plans are HDFC Top 100 Fund SIP, SBI Bluechip Fund SIP and ICICI Prudential Bluechip Fund SIP. 

Types Of SIP- Frequently Asked Questions

1. What are the types of SIP?

The types of SIPs include Regular SIP, Top-up SIP, Flexible SIP, Trigger SIP, Perpetual SIP, and Multi-Asset Allocation SIP, among others. Each type of SIP offers unique benefits to investors.

2. Which is the best type of SIP?

The best type of SIP is the one that aligns with an investor’s financial goals and risk appetite.

For example, if an investor wants to have control over their investment and has a high risk appetite, then a flexible SIP or trigger SIP could be suitable. 

3. Which SIP is most profitable?

There is no one-size-fits-all answer to this question, as the profitability of a SIP depends on various factors such as the type of fund, investment horizon, market conditions, and economic factors. However, historically, equity-based SIPs have generated higher returns than debt-based SIPs over the long term.

 

4. Which type of SIP is best for 3 years?

A hybrid SIP, which invests in a mix of equity and debt instruments, could be a suitable option. Hybrid funds aim to balance risk and return by investing in both equity and debt instruments, making them ideal for investors with moderate risk appetite.

5. Which is the safest SIP?

Debt-based SIPs, such as short-term debt funds or ultra-short-term debt funds, are considered to be safer than equity-based SIPs as they invest in debt instruments with lower credit risk.

6. Can I withdraw SIP anytime?

Yes, investors can withdraw from their SIP at any time. However, investors need to keep in mind that if they withdraw from their SIP before the completion of the investment horizon, they may not be able to achieve their financial goals.

7. Do we get a loss in SIP?

Investing in SIPs is subject to market risks, and investors may incur losses if the market performance is poor. However, SIPs are designed to reduce the impact of market volatility and help investors achieve their financial goals over the long term.

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