6 Types of SIPs Every Investor Should Know for Better Returns

January 13, 2025 By: Naresh Saini0 comments

Systematic Investment Plans (SIPs) have become a popular way to invest in mutual funds. Many investors are familiar with the regular monthly SIP, where a fixed amount is invested monthly. However, did you know that five other types of SIPs can enhance your returns and offer greater flexibility? Let’s explore these six types of SIPs to help you make smarter investment decisions.

1. Regular SIP: The Popular Choice

The regular SIP is the most commonly used type of SIP. In this method, a fixed amount is deducted from your bank account and invested in a mutual fund at regular intervals—monthly, bi-monthly, quarterly, or even half-yearly.

Key Features of Regular SIP:

• Fixed amount invested at regular intervals.
• Ideal for disciplined, long-term wealth creation.
• Best suited for investors with stable income.

This is the simplest and most straightforward way to invest in mutual funds, making it a popular choice for beginners.

2. Perpetual SIP: No End Date

As the name suggests, perpetual SIPs have no fixed tenure. You can continue investing as long as you want and stop whenever it suits you.

Advantages of Perpetual SIP:

• Ideal for long-term investments, such as retirement planning.
• You can benefit from the power of compounding over decades.
• Offers flexibility to stop the SIP whenever required.

Most mutual funds allow you to continue SIPs for up to 40 years, ensuring you can build wealth over a long time frame.

3. Flexible SIP: Adjust Investments Based on Market Trends

Flexible SIPs allow you to change the investment amount depending on the market conditions or your financial situation.

How Flexible SIP Works:

• Invest more when the market is down to buy units at a lower price.
• Invest less when the market is high to avoid overpaying for units.
• A minimum amount must still be invested regularly.

This option is perfect for investors who actively track market trends and want to maximize their returns.

4. Trigger SIP: Based on Market Movements

Trigger SIPs are designed for investors with a good understanding of the stock market. These SIPs start investing automatically based on predefined market conditions, such as a specific drop in market indices.

Examples of Trigger SIPs:

• Start investing when the market falls by 5% in a day.
• Trigger investments when a stock or mutual fund reaches a specific price.

While this type of SIP can help you take advantage of market opportunities, it requires knowledge and close monitoring of market trends.

5. Top-Up SIP: Increase Investments Over Time

A top-up SIP allows you to increase your investment amount periodically, usually aligned with your financial growth.

Why Choose Top-Up SIPs?

• Ideal for those with increasing income, such as salary hikes or promotions.
• Helps you invest more as your financial capacity improves.
• Ensures better returns due to higher investments over time.

For example, if you start a SIP with ₹5,000 per month and get a 10% salary hike, you can increase your SIP by ₹500 to ₹5,500 monthly.

6. Insurance SIP: Investment with Protection

This unique type of SIP offers term insurance coverage along with your mutual fund investments.

Features of Insurance SIP:

• Insurance coverage up to 10 times your first SIP amount.
• The coverage increases as you continue investing.
• Offers financial security to your family in case of unforeseen events.

This is an excellent choice for those looking to combine investments with life insurance benefits.

Choosing the Right SIP for Your Financial Goals

Understanding these different types of SIPs can help you align your investments with your financial goals. While regular SIPs are great for disciplined investing, flexible or trigger SIPs might suit those who want to time the market. Top-up SIPs and insurance SIPs offer added benefits for those with increasing income or looking for a combination of investment and protection.

Why Knowing SIP Types Matters

Many investors unknowingly stick to just one type of SIP—monthly regular SIP. While this is a good starting point, exploring other SIP types can unlock better returns and flexibility. For example, perpetual SIPs are ideal for long-term goals like retirement, while top-up SIPs let you take advantage of growing income.

By choosing the right SIP type, you can:

• Maximize returns.
• Stay financially disciplined.
• Ensure long-term financial growth.

Key Takeaways for SIP Investors

• Start Small: If you’re new to investing, start with a regular SIP and gradually explore other types.
• Align with Goals: Match the SIP type with your financial goals, like retirement, wealth creation, or financial protection.
• Stay Informed: Understand the benefits and risks of each SIP type before investing.