Are There Any Other SIPs For investing in mutual funds?

Investing is a long journey and if you want to succeed in achieving your financial goals, you may have to chart out a financial plan. Financial planning is essential for anyone who wishes to achieve their short term and long term financial goals. However, if you do not have enough savings, you may have to start saving so that you can allot a certain portion of that savings in an investment scheme.

Mutual funds are gaining traction in India because of their high risk rewards ratio. They are a pool of professionally managed funds that invest in multiple asset classes depending on the nature of the scheme. If you seek capital appreciation through market linked schemes, you may consider investing in mutual funds.

Mutual fund investments offer multiple payment options

Mutual fund houses offer two ways to make an investment in mutual funds. If you wish you may make the traditional lumpsum investment. A lumpsum investment is where you make the entire mutual fund investment right at the beginning of the investment cycle. Mutual fund investors who make a lumpsum investment are usually allotted more units in quantum with the investment amount and depending on the fund’s existing NAV.

However, if you are keen on investing for the long run and looking to give your investments a systematic approach, you may start a SIP in mutual funds.

What is a Systematic Investment Plan?

A systematic investment plan or SIP is easy and hassle free way to invest in mutual funds. One may invest in mutual funds via SIP if they wish to inculcate the discipline of investing regularly. SIP allows people to invest small amounts at regular intervals which is usually every month. Every month on a fixed date, a predetermined amount is debited from your savings account and electronically transferred to the mutual fund. If you are a KYC compliant individual you might even be able to invest in a mutual fund via SIP by visiting the AMCs website through a laptop or even a smartphone with a decent internet connection. If you start a mutual fund SIP at an early stage in life, you may even benefit from compounding and rupee cost averaging.

Types of SIP other than conventional SIP

Apart from the conventional SIP that we mentioned above, there are a few other SIP investment options currently available in the market which mutual fund investors may consider investing to increase their chances of creating wealth. They are mentioned below:

Perpetual SIP

Perpetual SIPs do not come with a termination date. Investors may continue investing in mutual funds via perpetual SIP till they are able to achieve their financial goals. Perpetual SIPs do not have a renewal policy and one may continue investing as long as they want to. A perpetual SIP generally targets the long term financial goal of a mutual fund investor.

Top up SIP

If the mutual fund you invested in is doing well and you want to increase the amount you are paying at regular intervals, then some fund houses the option to top up your initial SIP amount. This type of SIP investment where you can gradually increase your monthly SIP amount is referred to top up SIP.

Flexible SIP

There are some among us who have to deal with irregular cash flow. A flexible SIP aids such investors by giving them the liberty to increase or decrease the monthly investment amount depending on their financial situation.

Trigger SIP

A trigger SIP is generally considered by seasoned investors who have a good understanding of mutual fund investment and market volatility. New investors who are still learning or are naïve to a deep understanding of how mutual funds work should try and refrain from this type of SIP investment.

The above mentioned are the different types of SIPs which one may consider investing other than the conventional SIP. However, if you are making an investment in mutual funds do remember that investments made in mutual funds are exposed to market volatility. And hence, capital appreciation through mutual fund investments isn’t guaranteed.

If you are a first time investor and wondering how to pick a mutual fund to start one of the above SIPs, there are a few things that you may look into before making the investment. Do check for the expense ratio of the fund. A higher expense ratio may affect the capital appreciation in the long run. Also, it is better that you consider a mutual fund that has been a consistent performer rather than investing in a top performing fund. Also, check whether the fund’s risk profile aligns with your risk appetite. The last thing you want is to invest in a scheme that doesn’t match your risk appetite.

Also, if you are entirely new to mutual fund investing or financial planning in general, make sure to consult a mutual fund investment before making the final investment decision.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.