SIP is a payment mode you can opt for when investing in mutual funds. They are incredibly popular with both new and seasoned investors for their flexibility and low barrier to entry, with most SIPs needing as little as ₹500 per month.
So, if you have an excess of ₹5,000 in your savings account at the end of each month after attending to the essentials, consider investing it. For starters, SIPs and
investment plansare a good place to begin.
This blog explains the best SIPs for ₹5,000 per monthto help you start your investment journey. Read on!
Best SIPs for ₹5,000 Per Month
Regular SIP
This is the most common and popular type of SIP. Regular SIPs let you contribute a fixed amount of money each month at a particular date. The amount you invest stays fixed, letting you ride out market ups and downs.
The basic idea here is to enable you to accumulate a large corpus with small regular investments.
Most investment platforms and apps allow you to automate this process to electronically transfer funds from your bank account to your SIP account. It is a hassle-free process that does not need active management once set up.
Top-Up/Step-Up SIP
This SIP allows you to increase your SIP amount at regular intervals. For example, you can start an SIP of ₹5,000 per monthand ask your fund manager to increase the SIP by ₹2,000 every 12 months.
Top-up SIPs are great if you are a salaried individual and get annual raises and bonuses. You can gradually increase your investments as your salary increases, resulting in a higher corpus.
Flexible SIP
You can change your SIP amount as per your requirements. So you can invest more when prices and down and less when they are up. You can also alter your investment amount according to your financial circ*mstances.
Note that you must inform your fund house of the SIP contribution change at least one week before the next due date of your SIP.
Trigger SIP
Trigger SIPs let you time your investments based on certain market conditions like a predetermined NAV level, specific index levels or a favourable market condition. The SIP can be triggered in two ways: Price trigger or time trigger.
In a price trigger,you set a price for the mutual fund, and when the fund reaches your stated price, an SIP contribution is made.
For example, if you set the price trigger as ₹2,000, an SIP contribution will be made if the NAV of the fund hits ₹2,000 or falls below it.
In a time trigger,you set a specific time for investment. For exmaple, you can set a trigger for when there is a market correction of more than 10%.
Perpetual SIP
Unlike most SIPs that require you to state a tenure – usually 3 or 5 years, perpetual SIPs do not have an end date. Any SIP where you do not have to state a maturity date is considered a perpetual SIP.
These are great as they let you take advantage of long-term compounding, so with a minimal SIP of ₹5,000 per month, you can hope to build a considerable corpus over time.
The SIP contribution will continue until you request the fund house to stop them. You can also sell/redeem your funds at any time.
Multi SIP
This lets you invest in multiple schemes under one fund house. So, with an SIP of ₹5,000 per month, investing in a multi-SIP with four schemes will automatically allot ₹1,250 to each scheme under the fund house. This method lets you diversify your investment portfolio.
SIP with Insurance
These SIP schemes provided by fund houses offer a free, optional life over. The cost of the insurance here will be borne by the fund house. You also do not need a medical screening and insurance coverage starts when your SIP commences.
This SIP is better suited for experienced investors with market knowledge, as it requires technical analysis and a good understanding of market trends.
What Type of Fund Should I Pick for a Monthly ₹5,000 Investment Plan?
- Equity Funds by Market Cap:Equity mutual funds invest a minimum of 65% of their funds in stocks/company shares. Large-cap funds are great for risk-averse investors; small-cap funds offer comparatively higher returns at a higher risk, and mid-cap funds lie in between.
For more details on equity-based investing, read our blog on How To Invest ₹10,000 In India For High Returns.
- Tax*Saving Funds:ELSS funds are the only mutual funds are offer tax*deductions of ₹1.5 lakhs in annual investments. However, the profit/return is taxed as capital gains like other mutual funds. They are also equity-based investments.
- Debt Funds:These are low-risk investments that offer lower interest rates than equity funds in exchange for sustained returns. We recommend you split your SIPs into debt and equity to generate decent returns.
Conclusion
SIPs are an effective way to remain disciplined in turbulent markets. They are also easily accessible since many do not have high minimum investments, and you can easily begin investing with an SIP of ₹5,000 per month.
Although ₹5000 may not seem like much, with steady contributions over the long term, you will be surprised to find how much profit you can accrue!
