By 
Money is the biggest motivator in this world. With the introduction of electronic ways of keeping records, although 90% of the world’s money is only on paper, the desire to see an astronomical figure under the heading of ‘bank balance’ never lost steam. SIP investments provide investors with an excellent excuse to save, and save more, and emerge as a winner in the battle called ‘life’.
No one can deny the fact that people are born with different instincts; even investment advisers know it. Perhaps this is the reason why there are countless SIP plans for every type of investor. Some of the types of investment plans for SIP worth mentioning are:
1. Growth plans: A person can choose a particular amount to invest in SIP each month, and the money will continue to accumulate. Depending on the percentage of the equity and debt component, your investment will see growth. And, at the end of the term, your money plus returns become the value of your fund. During the tenure, if the fund does not perform as expected, the investor is free to switch to other better performing funds.
2. Dividend plans: Businesses need capital. To obtain the capital, they grant the property to the investors in proportion to the amount that the latter put at stake. At regular intervals, mainly annually, companies return a percentage of their earnings to their investors in the form of dividends. Dividend-type SIP plans are good for those who want some returns at regular intervals. Dividends give a vague idea of how the funds are performing.
3. Fixed maturity plans: These are mostly closed mutual funds that invest in debt instruments. Since the maturity is predefined, the investor feels somewhat more secure. If more than one year is invested, the returns are tax-free. So if you want to stay away from the tax liability that is sure to come along with fixed deposits, you can consider investing in FMP. These can also be dividend plans.
Depending on where the money is invested, SIP investment plans can be divided into: equity funds and debt funds.
- Capital funds: As the name suggests, the funds are entirely focused on market-linked instruments, such as company stocks. Since the value of stocks varies according to the market index, the risk is higher. However, when held for a longer period, you can enjoy the sharp increase in value that no other instrument offers.
- Debt funds: When you opt for debt funds, your money is invested in those instruments that remain unscathed from market movements. Most of the fund managers invest the money in those certificates of deposits and commercial papers whose maturity coincides with the term chosen by the investor. Therefore, you get a fixed return; For this reason, the managers, from the very beginning of the scheme, clearly inform their clients about the investment paths, as well as the expected returns.
The third premise for the classification of SIP plans is the lock-in period. Investors can opt for the following types of SIP investment plans depending on whether they can save the money for a specified period or not:
FOR. Open funds: As an investor, you enjoy full control over your money. You do not need to stick to the investment for the chosen term and can withdraw funds when necessary. There is no guarantee of how many returns you will get, but the silver lining is that these funds are absolutely liquid. You can choose to invest at any time after launch.
B. Closed funds: These SIP plans have a lock-in period. An investor cannot withdraw money before five or seven years have elapsed. You can invest in these only for a fixed period immediately following the launch of the plan. SEBI, to provide relief to investors, has granted two exit routes: buyback and listing on the index.
To conclude, the world of SIP investments is really vast and offers something or another to all types of investors. Higher returns, flexibility to switch, freedom to partially withdraw and, to top it all, tax benefits are some of the advantages that are encouraging people to invest in SIP plans.