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Investors who also prefer investing in mutual funds for the long term usually opt for a systematic approach for their investments through the SIP route. A systematic Investment Plan (SIP) also helps investors invest in mutual funds via electronic transactions regularly. Also, the tenure of SIP can be any depending on the instructions provided by the investor to the AMC. In other words, the tenure can be fixed or can go as long as the investor wants. In this article, we will discuss Perpetual SIP and the differences between Perpetual SIP vs Normal SIP.

What is Perpetual SIP?

A Perpetual SIP is a Systematic Investment Plan (SIP) that does not have an end date i.e it goes on forever. While signing up for the SIP mandate form, you have an option to leave the end date column blank. If the column is left blank, it means that you have opted for perpetual SIP where the SIP will continue till 2099. 

Generally, for SIP payments every month, Electronic Clearing Service (ECS) is enabled for you. Therefore, the perpetual SIP will not terminate unless you give a written communication to your bank and mutual fund house. Also, you need not renew your SIPs and continue to invest as long as you want. 

Advantages of Perpetual SIP

  • Registering for a SIP involves a lot of paperwork. Therefore, there is less hassle by avoiding the paperwork for SIP renewal. 
  • You do not have to keep a tab on when your SIPs are expiring and intimidate the fund house about renewal dates. 
  • It helps to maintain a financial discipline by investing regularly for the long term. 

Drawbacks of Perpetual SIP

When you invest in a mutual fund through perpetual SIP based on its excellent recent performance. The fund continues to perform well for a specific duration and you stay invested. Over time, the consistency of performance may or may not continue in the long term. You may suffer losses if you continue to invest without tracking the mutual fund performance. Therefore, it is important to monitor your funds regularly. 

Perpetual SIP vs Normal SIP – What’s the difference? 

The following are the differences between Perpetual SIP and Normal SIP

ParametersPerpetual SIPNormal SIP
DefinitionPerpetual SIPs do not have a termination date and also will continue up to the year 2099. Normal SIP also has a specific termination date. 
RenewalThey don’t require renewal as you can also stay invested as long as you want. It also requires periodic renewal depending on your needs.
Suitable for Perpetual SIP is also suitable for investors who wish to stay invested for the long term. Regular SIP is also suitable for investors who wish to stay invested for a fixed period.
Form Requirement You also need to leave the SIP termination date blank in the SIP form. You also need to fill the SIP termination date in the SIP form. 

Who Should Opt For Perpetual SIP?

Perpetual SIP is suitable for investors who wish to plan for their long term financial goals like retirement corpus, children’s education, etc. Also, those investors who do not want to keep a close tab on the termination date can prefer perpetual SIPs that give them the liberty to stay invested as long as they want. Furthermore, it inculcates an automatic discipline in investments. 

However, investors must remember that they need to give an advance intimation about termination about three weeks ahead of the SIP date and only then the SIP will be terminated.

Conclusion

Investment in mutual funds is a long journey. And the best advantage of SIP investment, be it normal SIP or perpetual SIP, is that you can start investing regularly with an amount as low as Rs.500. But it is essential to link SIPs to your financial goals. With a defined financial goal and investing in a scheme through SIP gets potentially closer to your goal. Therefore, you must align your financial goal with your investment horizon and risk tolerance levels. This enables you to identify the investment options and the possible amount you need to invest regularly to achieve your objectives. 

You can use Scripbox’s SIP calculator to estimate the amount that you need to invest to achieve the target amount. Vice-versa, you can estimate the maturity value by entering the investment amount. 

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