When it comes to investments in mutual funds through SIP (systematic investment plan), you can go about a few ways. There is the traditional fixed-tenure SIP and then there is the perpetual SIP. However, what exactly is a perpetual SIP and how does it differ from the fixed-tenure SIP? In addition, if it is perpetual, would you be able to terminate it should you choose to opt-out?

Let us continue reading to understand this in detail.

What is a Perpetual SIP?

Perpetual SIPs do not have any end dates. If you want to stop a perpetual SIP, you would have to fill an SIP closure form and submit it to your Asset Management Company (AMC). When you opt for perpetual SIPs, you do not need to renew your SIPs now and then. You can invest as long as you wish.

For e.g., when you opt for a fixed-tenure SIP with an investment horizon of, let us say, 10 years, your AMC will stop debiting your bank account for the SIP after this period is over. If you wish for it to continue, you would have to intimate the AMC to continue with the SIP and decide on tenure extension. On the other hand, a perpetual SIP will continue until you intimate the AMC to stop. This is the basic difference between a fixed-tenure and a perpetual SIP.

What are some features and benefits of Perpetual SIP?

Similar to a normal SIP investment, a perpetual SIP investment inculcates a regular savings habit among investors. This is very important when it comes to help achieving your long-term investment goals. However, a perpetual SIP offers additional advantages as opposed to a regular SIP. They are:

1. Perpetual SIPs help you avoid paperwork and SIP renewal hassles
2. You do not maintain an eagle-eye on your SIPs
3. They could help you stay financially independent over long periods
4. They do not have a termination date
5. Investors can invest as long as they wish for
6. Suitable for those who want to invest for a longer duration

Who should opt for Perpetual SIPs?

Perpetual SIPs are  apt for young investors (in their late 20s or early 30s) as they usually invest with a long-term horizon. These investors can avoid repetitive filling and submission of SIP renewal forms. Perpetual SIPs should be avoided if you are nearing your retirement or have already retired. Perpetual SIPs do not add any value in such cases.

What is the difference between Normal SIP and Perpetual SIP?

Perpetual SIP vs. Norma l SIP

What are the drawbacks of perpetual SIP?

A fund might be performing well when you chose it, but eventually stopped performing. Had you enrolled in a perpetual SIP, you would invariably invest each month without realizing that the performance of the mutual fund was deteriorating.

Conclusion

Perpetual SIPs work in favor of those who wish to  invest in SIPs for an extended period and one of the best ways to make the most out of SIPs is to align it to your goals.