7 Different Types of SIP Investments in India (2024)

Recently SIPs have become more popular because of their ease and affordable investing options. Where, one doesn’t need to time the market and can invest with a small amount, and get the benefit of rupee cost averaging. Additionally, SIPs are helping investors accumulate wealth for their future needs by also securing their investment to a certain extent.

SIPs are a more disciplined approach for investors who desire to invest in mutual fund schemes. Furthermore, its various options serve different types of investors based on their priority, cash inflow, and financial condition. 

In this article, we will provide a piece of valuable information about SIPs, what are the SIP types? Their advantages and disadvantages, When to choose which one? Read on to learn more. 

What are SIPs?

Systematic Investment Plans are an efficient and disciplined method for investors to invest in predetermined amounts at regular intervals in mutual fund schemes. It is further helping small investors by allowing them to invest in small amounts at regular intervals. (most SIPs are starting from ?100). This method of investment provides the investor with the benefit of rupee cost averaging and compounded returns.

SIP is popular among retail investors for its simplicity and ability to mitigate the impact of market volatility on investments thus, encouraging investors in their savings and providing the benefit of compounding and rupee cost-averaging.

To make informed decisions about how to invest in SIP and identify the best SIP for long term, it's essential to understand the market trends and investment strategies.

What are the Different Types of SIPs?

There are mainly 7 different types of SIPs in the market but choosing the right one is the key to accumulating wealth. Some of them are as follows :

1. Regular SIP

2. Flexible SIP

3. Top-up SIP

4. Perpetual SIP

5. Trigger SIP

6. SIP with Insurance

7. Multi SIP

Regular SIP

It is one of the most popular and simplest types of SIP used by a broad range of investors. This SIP scheme enables investors to invest in their preferred mutual funds in fixed amounts at regular intervals like monthly, bi-monthly, quarterly, or half-yearly based on one’s own individual preferences. Additionally, there are also daily and weekly SIP options, however, these are less recommended ones.

The process of investment in the regular SIP is pretty straightforward. Here, investors have to choose their investment period, contribution amount, and Frequency of investment, according to their investment plan. In Regular SIP, the investors cannot change the installment amount in the middle of the investment tenure.

It is a smooth process as it doesn’t require regular monitoring from the investors and an equal amount will be invested irrespective of market ups and downs. As a result, it balances out the cost of each unit purchased in SIP.

To see how this can benefit your portfolio, use our SIP calculator and Step-Up SIP calculator to explore potential returns.

Flexible SIP

The flexible systematic investment plan also known as flexi SIP or Flex SIP is one of the most outstanding options in SIP investments.  Unlike regular SIPs, which involve a fixed amount of investment, it offers flexibility to alter the amount one wishes to invest depending on the changing market conditions and personal financial standing. 

This flexibility allows investors to increase their investments when markets are low, where the unit prices of SIP will also be low, and decrease their investments when the markets are high.

Besides this, the investors can adjust their installment amount as per their financial health. For instance, they can reduce the investment during a financial crunch and increase during the period of surplus. In order to alter the installment amount of the SIP, investors will required to inform the fund houses at least a week before the SIP deduction date.

Furthermore, flexible SIPs even provide an option to pause the installment amount, which offers an immense advantage during an acute financial crisis. Flexible SIPs help an investor reorient his investment strategy much better to his financial goals and market movements by providing an option to adjust their funds.

Top up SIP

Top-Up Systematic Investment Plans are also known as Step-Up SIPs. These SIPs offer a well-planned way of increasing investments made at regular intervals. Through this top-up SIP, one can gradually increase their periodic investments at certain predetermined intervals along with their rising income. 

For instance, You can start with a ?4,000 monthly SIP and leave an instruction to increase this by ?1,000 every six months to the fund house. So, your installment amount would get increased to ?5,000 after the first six months. At the end of another six months, the installment amount will further by ?1,000 and will continue to increase till the end of the tenure of the SIP. 

As compared to a regular SIP, a top-up SIP increases the investment incrementally to leverage the power of compounding more effectively and helps an investor build a large corpus in a short period. 

Many Asset Management companies facilitate these step-up contributions. Normally, they allow increments in multiples of ?500. This periodic increase not only accelerates wealth accumulation over a period but also reduces the impact of inflation on your investment returns. Thus, if investors want to get optimum savings aligned with their financial growth, a top-up SIP would not be a bad choice at all.

Perpetual SIP

A Perpetual Systematic Investment Plan is when an investor gets the flexibility to invest without a fixed tenure. Unlike the traditional SIP, where the end date needs to be compulsorily specified, a perpetual SIP just goes on until the investor wishes to stop it.

This kind of SIP works for investors keen on long-term compounding with continuous investment without the trouble of renewal. In a perpetual SIP, an investor just has to enter the start date, and the investment will run continuously until it's been instructed to the fund house or AMC to stop it. 

Thus, having the option to stay invested for a long period allows one to enjoy sustained compounding. if a need arises, the investors can redeem their investments at any time by giving a stop instruction to the fund house. 

Trigger SIP

A Trigger Systematic Investment Plan (SIP) is one where investments are not made on a periodic, time-bound basis but at the instance of certain market-related conditions or events. In this kind of SIP, the investment will start only when predefined triggers, which can either be on favorable market movements or at particular NAV levels, are reached.

For example, an investor could create a trigger SIP to start investing in a mutual fund only when its NAV falls below a certain threshold. Trigger SIPs require investors' understanding of the market dynamics and timing and, therefore, are suitable only in cases of experienced investors who can set and manage these triggers effectively.

Investors who consider investing in trigger SIPs must have the time and relevant knowledge to actively monitor changes in market conditions and adjust triggers accordingly. Thus, it provides an opportunity to increase returns—by investing during good times and keeping a low key during bad times. 

Overall, the trigger SIPs represent an investing approach targeted at investors with a good understanding of the movements in the markets. 

SIP with Insurance

SIP with Insurance is a scheme that blends dual benefits - systematic investment and life insurance coverage. Under this SIP your funds get invested in mutual funds and a portion of the premium is allocated toward insurance coverage.

This SIP provides a lump sum to your nominee in the unfortunate event of untimely death during the investment tenure. The insurance coverage is usually provided at not less than ten times the initial SIP amount and rises over time. 

However, this feature is available mostly for equity mutual funds. Only a few asset management companies are providing it for long-duration investments. Not to forget, this insurance does not impact the performance of the mutual fund itself. This combined approach will ensure that while one is growing their wealth through regular investments, financial protection is also being built up for one's loved ones.

Multi SIP

Multi-SIPs or multiple SIPs are a flexible and intelligent way of making investments in different mutual fund schemes at any particular time. It enables one to automatically invest a fixed amount across schemes in different fund houses by providing diversification across a portfolio. This SIP results in risk diversification, and possibly an improvement in return. 

If you start a Multi-SIP with an amount of Rs. 5,000, it gets distributed into four schemes, each allocating Rs. 1,250. This makes it a paperless process with the least investment procedure all you need to do is give one form and payment instructions and your SIP plans are set. 

The Multi-SIP options are best suited for those investors who seek to optimally diversify their risk exposures and find huge returns with appropriate investments.

Learn more with our latest blogs “SIP vs RD” and “SIP vs FD”

Which Type of SIP is Best?

From the above 7 types of SIP plans, which type of SIP is better to invest in according to your knowledge about SIP, investment goal, and financial health? Let's discuss about which SIP is best for you. 

As we discussed, regular SIP allows investors to choose the investment tenure, Installment amount, and frequency of investment. However, It doesn’t allow investors to alter these during the investment tenure, Thus, it is suitable for those investors who have regular and uniform sources of income and for those who have fixed long-term investment goals.

On the other hand, Step-up SIP is also quite similar to regular SIP apart from one thing, it has the additional feature of increasing the installment amount over the preferred specific period by the investor. This is the best suitable SIP for those investors who have incremental earnings over the period.

The below table will give you a detailed understanding of the differences between Regular SIP and Step-up SIP

Likewise, Perpetual SIPs are also similar to regular SIPs in their features. However, it doesn’t have a fixed maturity period and the investors keep investing until they feel to take it back. It is suitable for long-term Investors who don’t have any specific plan.

Flexible SIPs offer flexibility to investors to alter or adjust their investment period, Contribution amount, and frequency of investment and thus it is best suitable for investors with varying incomes such as professionals and freelancers.

Trigger SIPs are suitable for only those investors knowing market dynamics. Because they purchase SIP units only based on certain market conditions and events.

Multi-SIPs are suitable when multiple schemes are doing good in the mutual fund houses but not all the time funds tend to perform well. so investors must be cautious while investing in multi-SIPs.

Conclusion

Wrapping up, SIPs are the most effective and simple way of investing in a mutual fund and securing your savings. Even though SIPs are considered safer investment options, Investors are advised to do proper research based on their investment objective and seek financial advice from experts.

In this article, we covered topics about SIPs, types of SIPs in India, and which type of SIP is best. With this, you must be aware of which SIPs suit you better and when to choose them.