Complete guide on regular SIP or trigger SIP

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Data released by the Association of Mutual Funds in India (AMFI) revealed that the total SIP (Systematic Investment Plan) inflows reached an all-time high in February 2024, breaching the ₹19,000 crore mark for the first time. The Indian investor is well aware of the power of SIP investments to grow their wealth. However, a query that often arises in the mind of first-time investors is, which type of SIP investment should they pick. Read on to know more about two types of SIP investments – trigger SIPs and regular SIPs. 

What are regular and trigger SIPs, and how do they work?

Regular SIPs: 

These are the most popular types of SIP mutual fund investments. You can use an online SIP calculator to calculate your ideal investment amount and tenure and invest a fixed amount in a mutual fund scheme via an SIP. One of the many advantages of regular SIPs is rupee-cost averaging. This is when you as an investor purchase fewer mutual fund units when the markets are high-priced and higher units when the market falls. This averages the total loss incurred, hence helping you grow your returns. You can choose to make weekly, monthly, bi-monthly, quarterly, or half-yearly SIP contributions by opting for regular SIPs. The USP of a regular SIP is to help investors significantly grow their income through small, regular contributions to a mutual fund scheme. 

Trigger SIPs: 

A trigger SIP investment occurs when a specific event – pre-defined by you – occurs in the market. You as an investor can define a favourable market movement as an event and benefit from the movement through a trigger SIP. You must be aware of the volatility of the market to earn returns through a trigger SIP. This type of SIP investment, hence, is more suitable for experienced investors who have the required knowledge to predict how the market would react in the near future. 

How to choose between a regular SIP and a trigger SIP?

You can consider the following points before choosing between regular SIPs and trigger SIPs:

  • Analyse your understanding of the market: Trigger SIP investments require you to have a good understanding of market conditions. You must, therefore, conduct an honest assessment of your market understanding before opting for a trigger SIP investment. You can try defining a few events and check if they are attained in the near future to test your understanding of the market. 
  • Consider your risk appetite before investing: Regular SIP investments mitigate the overall risk of an investment portfolio thanks to rupee-cost averaging. Trigger SIPs, on the other hand, can pose a higher risk to your portfolio. You must, therefore, consider your risk appetite before choosing the trigger SIP option.-
  • Analyse your ability to constantly monitor your investments: Investors who do not have the time to review their mutual fund investments can benefit from regular SIP investments. However, in the case of a trigger SIP investment, you must constantly monitor the market to check if your pre-defined event has occurred. You should choose a trigger SIP investment only if you have the time to constantly monitor your investment. 

Regardless of the type of SIP investment you choose, you must start by clearly defining your investment goals and using an SIP calculator to calculate your returns by the end of the investment tenure. 

Christopher Stern

Christopher Stern is a Washington-based reporter. Chris spent many years covering tech policy as a business reporter for renowned publications. He has extensive experience covering Congress, the Federal Communications Commission, and the Federal Trade Commissions. He is a graduate of Middlebury College. Email:[email protected]

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