Of late, the popularity of Systematic Investment Plans have been shooting through the roof. An increasing number of individuals are opting to invest in the Indian stock market through various kinds of SIPs. Wondering what an SIP is?
A Systematic Investment Plan, or SIP for short, is a method of investing, where you’re required to make regular contributions of a fixed amount for a certain period of time. These contributions that you make toward an SIP are invested in the individual stocks of companies or in mutual funds. Once the specified tenure ends, the amount in the fund can be withdrawn and used by you.
Now that you know what an SIP investment is, you’re probably wondering how long you can stay invested in one, aren’t you? In this article, we’re going to take a look at whether you can invest in an SIP for long periods of time, say like 30 years or more.
Usually, when you start a Systematic Investment Plan, you will be required to fill an SIP application form. On the application form, you will be required to specify the tenure for which you wish to stay invested for. Generally, the most common tenures are 5 years and 10 years. However, depending on the mutual funds investment that you wish to make, fund houses may even permit you to opt for tenures longer than that as well. When choosing a SIP tenure, it is important to consider your investment goals and risk tolerance. If you are looking for long-term growth, you may want to choose a longer tenure. However, if you are not comfortable with taking on too much risk, you may want to choose a shorter tenure. You can use a CAGR calculator to estimate the potential returns of your SIP investment over different tenures. This will help you to determine the best tenure for your individual circumstances.
But then, what about if you wish to invest in an SIP for more than those tenures? Like say, 30 years? Will you have to open a new SIP once again, after the previous one reaches the end of its tenure? Certainly not.
Here’s where the concept of perpetual SIPs comes into the picture. As the name itself signifies, perpetual SIPs have no end to their tenure. You can choose perpetual SIP when filling out your application form. With perpetual SIP, you don’t have to worry about tenures at all. You can stay invested for as long as you wish.
Yes. With a perpetual Systematic Investment Plans, there’s absolutely no restrictions on closing whatsoever. You can choose to exit your SIP even after just a few months as well without having to incur any penalty.
So, there you have it. With a perpetual SIP, you can not only invest for as long as you like, but also get the freedom to exit from the SIP investment at any point you like. This makes it the perfect option for individuals wanting to go the long-term wealth creation way.
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