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7 Types of SIPs

SIPs as investment

The SIP is the easiest and most consistent way to invest in equities. You put aside a monthly amount from your salary, and it gets invested in the stock markets. This helps in time cost averaging and ensuring that you can rectify your mistakes before they become too big. But do you know that there are 7 types of SIPs as per your investment goals, budget and risk appetite? The 7 types of SIPs are given below:-

Related: Build a Rs 25 crores retirement fund in 30 years with a monthly SIP of Rs 36,110

7 Types of SIPs

The seven types of SIPs are:-

 1. Regular SIP- Regular SIP is like a recurring deposit of a fixed amount. You can give standing instructions to the bank to debit a particular amount every month from your bank. The same amount is invested every month.

2. Step Up SIP- Every year, you get an increment in your job. For the additional income, you should make some SIP contributions as well. With the step-up SIP, you can increase the SIP amount by a specific percentage every year. For example, you start the SIP by x amount and then increase it by 5% per year to account for the increase in income. 

3.Flexi SIP-This lets you benefit from market cycles by choosing the amount based on your analysis of the markets. If the markets seem overvalued, you can reduce your SIP amount, and when the markets are down, you can increase your SIP amount. 

4.Trigger SIP- This is a SIP which triggers when the trigger event happens. For example, you want to buy a mutual fund when the NAV falls to a particular value. Then, you can use a Trigger SIP.
Perpetual SIP- This SIP does not have an expiration date and is mostly used by young investors as they need to invest for the long term. 

5.SIP with insurance- Term life insurance is added to the customer’s mutual fund SIP by various fund houses. It basically provides you with insurance without any extra cost, and the validity is till you hold the investment amount. 

6.Multi SIP- With multi SIP, you can invest in mutual fund schemes of different firms through a single instrument in a single SIP. It reduces paperwork and increases convenience. 

Related: SIP Vs Lumpsum: Which one is right for you to invest in mutual funds

Which SIP to choose?

The SIP you should choose depends on your goals and objectives. It also depends on your financial situation and your age. If you are comfortable increasing the SIP amount every year, you should choose to step up SIP. If you like to time the markets, you should choose Flexi SIP. If you wish to invest only when the market falls, you can use Trigger SIP. Whichever option you select, you should understand the basic concept of the 7 types of SIPs before making your decision.

Related: Want to know how much your SIP can offer: Use an SIP calculator

How do SIPs work? | Ankur Warikoo