Perpetual SIP

Perpetual SIPs are ideal for investors pursuing long-term financial goals, offering flexibility and continuous wealth creation. These plans suit individuals with higher risk tolerance who aim to benefit from market fluctuations and the power of compounding over time.
EXPLORE FUNDS
Perpetual SIP in mutual funds
EXPLORE FUNDS
3 min
10-December-2024

Perpetual SIPs keep going without any fixed end date. To stop one, fill out an SIP closure form and give it to your Asset Management Company (AMC). With perpetual SIPs, you don't have to renew them regularly; you can keep investing for as long as you want.

Investing successfully requires patience and persistence, especially for long-term financial goals. Systematic Investment Plans (SIPs) are a top choice among investors for achieving such objectives. With SIPs, you invest a fixed amount regularly in mutual funds, helping to average your investment costs. Additionally, SIPs leverage compounding and staggered investment, reducing risks and potentially boosting returns over time. Perpetual SIPs are ideal for those aiming to build a nest egg for the distant future. Wondering what perpetual SIP means in mutual funds? This guide provides all the essential details to help you understand perpetual SIPs and make informed investment decisions for long-term financial growth.

What is Perpetual SIP?

A Perpetual SIP is a type of Systematic Investment Plan (SIP) that does not have a fixed end date and continues indefinitely. When filling out the SIP mandate form, you can choose to leave the end date section empty, indicating that you have opted for a perpetual SIP, which typically extends until 30 years.

Usually, Electronic Clearing Service (ECS) is set up for monthly SIP payments, ensuring your perpetual SIP runs continuously until you decide to cancel it. There is no need to renew your SIPs; you can keep investing as long as you wish.

Advantages of choosing Perpetual SIP

Perpetual SIPs offer an enduring investment solution compared to normal SIPs, which have a fixed time frame. With perpetual SIPs, there's no end date, allowing continuous investment in the same mutual fund. Here are the key advantages:

  • Long-term investment: Perpetual SIPs allow long-term wealth accumulation without worrying about SIP end dates, eliminating paperwork for new SIPs.
  • Flexibility: Unlike normal SIPs, perpetual SIPs enable indefinite investment, offering flexibility to adjust investment amounts or stop at any time.
  • Rupee cost averaging: Continuous investment allows averaging investment costs, buying more units during market downturns, potentially increasing long-term returns.
  • Compounding: Perpetual SIPs benefit from compounding, where earned interest generates further interest over time, fostering significant investment growth.
  • Convenience: Eliminates the need for frequent SIP renewals, automating investments and focusing on long-term financial objectives.
  • Financial discipline: Encourages regular saving habits, fostering financial independence over time.

Also read: What Is Compound Annual Growth Rate (CAGR)

How is Perpetual SIP different from normal SIP?

Comparison Normal SIP Perpetual SIP
End date Has a specific end date, stopping debits at termination. No end date, allowing investments to continue indefinitely.
Renewal Requires investors to renew before the end date. No renewal needed as investments continue perpetually.
Suitability Suited for investors with fixed investment tenures. Ideal for long-term investments without specific timelines.
Termination date Investors must specify a termination date. No termination date required as it's an ongoing investment.


Is Normal SIP better or Perpetual SIP?

The choice between normal SIP and perpetual SIP depends on the investor's financial goals, risk tolerance, and investment horizon. While normal SIPs are suitable for short to medium-term goals, perpetual SIPs are ideal for long-term wealth creation and financial planning.

Are there any risks or disadvantages of Perpetual SIP?

If you opt for Perpetual SIPs in a mutual fund based on its recent strong performance, and the fund continues to do well for some time, you might keep investing. However, if the fund's performance declines over time, you may not realise it and keep investing. Continuously investing without noticing poor recent performance could lead to losses. Therefore, it is essential to monitor the fund's performance regularly.

Important factors to consider while choosing perpetual SIP

When choosing perpetual SIP, investors should consider factors such as investment objectives, risk tolerance, investment horizon, and fund selection. It is essential to align the investment strategy with long-term financial goals and periodically review the portfolio to ensure it remains on track.

Conclusion

Perpetual SIPs offer investors a convenient and flexible way to build wealth over the long term. By understanding the features, benefits, and risks associated with perpetual SIPs, investors can make informed decisions and achieve their financial objectives effectively. It is essential to conduct thorough research before embarking on a perpetual SIP journey.

Essential tools for mutual fund investors

Mutual Fund Calculator

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Motilal Oswal Mutual Fund SIP Calculator

Kotak Bank SIP Calculator

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