His SIP date was due 14 days hence. He wondered whether there was a way he could pre-pone the SIP date and benefit from the fall in markets as he had read that one should buy on dips in equity markets as you get more units.
Manthan was just passing by his colleague's desk when his eyes fell upon the television screen. The equity markets had come off their all-time peaks and experts were suggesting it was a time to buy. He had already been investing in mutual funds via the systematic investment plan (SIP), wherein small quantum of investment is made at regular intervals.
His SIP date was due 14 days hence. He wondered whether there was a way he could pre-pone the SIP date and benefit from the fall in markets as he had read that one should buy on dips in equity markets as you get more units.
Nayasha, on the other hand, had been investing for years together and wanted to go on a vacation. She was wondering what would be a good time to withdraw from the mutual funds kitty and she was too busy with her work to keep tracking the equity markets day in and day out.
For all those who face situations like Manthan's and Nayasha's, there is more to SIPs, which helps you deal with the ups and downs of stock markets and yet meet your investment goals. Let us explore the options at hand.
Flexi-SIP
If you are looking to invest different amount each month based on the market scenario or the surplus that you have at hand, then flexible or flexi-SIPs are the right choice for you. You can increase or reduce your SIP by choosing the following month's SIP amount. However, there are limits up to which you can invest in a month, which differs with each fund house.
However, if you are away on a holiday and aren't in a position to select the SIP amount, then you need not fret. The usual pre-fixed SIP amount would get invested if you don't take any action.
Step-up SIP
For those looking to increase their investments with growing income each year, a step-up SIP works best. Typically, if you want to increase the SIP amount in a fund, you would have to stop the ongoing SIP and start afresh or give a new mandate. If you opt for step-up SIP, then the amount that gets invested at each interval would increase by a selected percentage, which you can chose based on the increments that you anticipate.
If you don't want to increase your monthly commitment but have a decent surplus which you wish to invest in the ongoing SIP scheme, then you can use a top-up SIP.
Trigger
If you are sitting on the fence wanting to know the best time to invest or withdraw the money, then the trigger facility is just cut out for you. A trigger option lets you invest at a pre-set level, for instance, invest Rs 25,000 when the market falls by 2-5%. The movement can be based on the actual appreciation of funds or index levels such as BSE Sensex or Nifty 50. You can even base it on price to earnings ratio (the amount one is ready to pay for each rupee of earnings from a company), on a fixed date or on the net asset value (NAV).
The money is pre-invested in a scheme, offering easy liquidity, and moved to the scheme of your choice when the trigger hits. Even redemptions can be timed by setting a trigger at a desired level as you approach your goal. For instance, you can set an exit trigger to withdraw money when the markets rise to a level or the NAV crosses your target. These triggers help you build a profit discipline and ensure you don't get carried away when markets are on a euphoric ride.
Switch
You can transfer fixed amount of investments from equity to debt funds or vise-versa in single or multiple installments. When you opt for moving funds to a debt scheme you can do it in two ways – shift only the gains and keep original amount invested or shift the entire mutual fund holding to protect it from a market collapse.
Select your way to SIP, keeping an eye on exit loads that may be applicable.
Names and situations are hypothetical
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