How Does SIP Work? When to Invest in SIP ? Types Of SIP?

08/05/2022 SIP Scheme is an investment option where instead of putting a lump sum amount into mutual funds, the investors can invest a certain amount of money in mutual funds over a while. The investors can start SIPs at just INR 500 per month. SIP returns help them to accumulate wealth over a large period.
Once you apply for one or more SIP mutual fund plans, the amount is deducted from your registered bank account and invested in your mutual fund schemes. After making the first payment, you have the option to set the biller for auto-payments at the predetermined time intervals in the future. At the end of the day of the payments, the units of mutual funds are allocated to your account depending upon the NAV of the mutual funds.
When to invest in a SIP?
SIP Schemes can be started anytime the investing objectives of clients are matched with suitable schemes and associated risks. The plan must suit the long-term goals of the investors. So, there is no better day to start SIP than today, the sooner the better.
Types of Systematic Investment Plan (SIP)
There are 3 types of SIP Schemes you can start-
Perpetual SIP
This SIP scheme allows the investors to make investments without an end to the mandate date. Here the investor has the option to withdraw the amount invested as per his choice. Generally, a SIP carries an end date after 1 Year, 3Years or 5 years of investment.
Top-up SIP
As the name suggests, in this SIP scheme you have the option to increase the amount of investment periodically. Such increment could be due to an increase in income, promotion, or availability of additional corpus. Such funds are really helpful in making the best out of investment opportunities where the best and high-performing funds at regular intervals are available at lower prices.
Flexible SIP
Flexible SIP Schemes allow investors to increase or decrease the amount of investment as per/her choice. The investor can invest as per his own cash flow needs or preferences.
Benefits of investing in SIP
There are multiple SIP benefits over investing in Lumpsum. We have listed some of them as follows-
Disciplined investment: SIPs allow you to make periodic investments in a scheme that helps you to accumulate surplus or plan out for future events like retirement, foreign trips, children’s education & marriage. These plans help people who aren’t well-versed in the financial world and don’t have enough time to analyze the market movements from time to time. You can simply consult your financial planner and choose the right SIP scheme suitable for your financial needs. The sum would get auto deducted from your bank account so you don’t need to worry about on-time payments.

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