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Systematic Investment Plan (SIP) begins and terminates on a specified date. During the period of SIP investment, you invest a fixed sum on a monthly, quarterly, or annual basis.
A normal SIP terminates after the period ends. Perpetual SIPs do not have a fixed investment period. Perpetual SIPs continue until the time you wish to invest.
Generally, Electronic Clearing Service (ECS) is enabled by investors to make SIP payments, and hence, perpetual SIPs will not terminate until you inform your bank and the mutual fund house. Perpetual SIPs are advisable for long-term investors. With perpetual SIPS, you don’t need to renew your SIP now and then. You can invest as long as you want.
Perpetual SIPs are best suited for young investors as they generally invest with a long-term horizon. They can avoid filling and submitting SIP renewal forms. If you want to opt for perpetual SIPs, then you need not fill the SIP termination date column in the SIP application form.
You may decide to invest in perpetual SIPs in a particular mutual fund citing its excellent recent performance. The fund then continues to perform well for a specific duration offering good returns, and you continue to invest. Over time, you may not notice a continuous drop in the performance, and you continue to invest. You will suffer losses if you continue to invest month after month, without seeing the recent lousy performance. Hence, you must regularly monitor fund performance.
|Normal SIP||Perpetual SIP|
|Normal SIPs come with a specified termination date.||Perpetual SIPs don’t have a termination date.|
|Needs periodic renewal.||There is no concept of ‘renewal’ as you stay invested as long as you want.|
|Suitable for those who stay invested for a fixed period.||Suitable for those who wish to stay invested for a long-term.|
|Need to fill the SIP termination date column in the SIP form.||Need to leave the SIP termination date column blank in the SIP form.|
If you are financially disciplined, then you don’t need perpetual SIPs to force you to set aside and invest a fixed sum regularly. Carefully analyse your requirements and risk profile before deciding to invest through perpetual SIPs.