Different Types of SIP(Systematic Investment Plans) in Nepal – Top 3

In this post, we will discuss different types of SIP in Nepal. Systematic Investment Plan (SIP) is a method of investing a fixed amount at regular intervals in a mutual fund. It is a disciplined way of investing and helps investors to accumulate wealth over a period of time. SIP is a popular investment option in Nepal as it allows investors to invest small amounts regularly, instead of investing a lump sum at once. In this article, we will compare different types of SIPs available in Nepal and provide examples of historical SIPs.

First, let’s understand the different types of SIPs available in Nepal.

1. Regular SIP: This is the most common type of SIP where an investor invests a fixed amount at regular intervals (monthly, quarterly, etc.) in a mutual fund scheme. Regular SIPs are ideal for investors who want to invest a fixed amount at regular intervals and do not want to be bothered about the market fluctuations. This type of SIP is particularly suitable for those who are starting to invest for the first time and want to build a corpus over a period of time. You can calculate how much you can make using Regular SIP Here: SIP Calculator
2. Flexi SIP: This type of SIP allows investors to increase or decrease the investment amount as per their convenience. This is beneficial for investors who want to increase their investment during periods of market volatility or decrease it when they are facing financial constraints. Flexi SIPs are ideal for investors who want to have more control over their investments and want to adjust the amount according to their financial situation.
3. Step-up SIP: This type of SIP allows investors to increase the investment amount at regular intervals. This is beneficial for investors who want to increase their investment over time, as their income increases or their financial goals change. For example, an investor can start by investing Rs. 1000 per month and increase it to Rs. 2000 per month after 6 months. Step-up SIPs are ideal for investors who want to increase their investment gradually over time.
   

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Example of Returns using Different Types of SIP

1. Regular SIP:
   Investment sum: NRs. 5,000 per month
   Return: 13% p.a. over a period of 5 years
   Assuming the returns remain constant, at the end of 5 years, the total investment amount would be NRs. 300,000 and the total returns would be NRs. 121,000. The total value of the investment after 5 years would be NRs. 421,000.
2. Flexi SIP:
   Investment sum: NRs. 5,000 per month, with the option to increase or decrease the investment amount based on personal financial situation and market conditions.
   Return: 13% p.a. over a period of 5 years
   Assuming the returns remain constant, let’s assume the investment amount is increased by NRs. 2,000 per month starting from the second year. At the end of 5 years, the total investment amount would be NRs. 380,000 and the total returns would be NRs. 156,000. The total value of the investment after 5 years would be NRs. 536,000
3. Step-Up SIP:
   Investment sum: NRs. 5,000 per month in the first year, increasing by NRs. 500 per month in each subsequent year, until the end of the 5-year investment period.
   Return: 13% p.a. over a period of 5 years
   Assuming the returns remain constant, at the end of 5 years, the total investment amount would be NRs. 340,000 and the total returns would be NRs. 131,000. The total value of the investment after 5 years would be NRs. 471,000.

Please note that these examples are for illustration purposes only and actual returns may vary based on various factors such as market conditions, fund performance, and inflation. It’s important to consult with a financial advisor before making any investment decisions.

Regular SIP: Pros and Cons

Pros:

1. Consistent and disciplined savings: Regular SIP allows investors to save a fixed amount of money every month, helping them build a disciplined investment habit.
2. Affordable investment: With a low investment amount, it becomes easier for investors to start investing and grow their wealth over time.
3. Dollar-Cost Averaging: Regular SIP helps investors to average out the cost of their investments over time, reducing the impact of market volatility on their investments.

Cons:

1. Limited investment flexibility: With a fixed investment amount, there is limited flexibility for investors to increase or decrease their investment based on personal financial situation and market conditions.
2. Misses market highs: Regular SIP may miss out on the benefits of market highs as the investment is made at a constant rate every month.

Flexi SIP: Pros and Cons

Pros:

1. Investment flexibility: Flexi SIP allows investors to increase or decrease their investment amount based on personal financial situation and market conditions, providing more flexibility.
2. Capitalizes on market opportunities: With the ability to increase investment during market highs, Flexi SIP allows investors to capitalize on market opportunities and grow their wealth.

Cons:

1. Requires discipline: Flexi SIP requires investors to regularly monitor the market and their personal financial situation to make informed investment decisions.
2. Risk of over-investment: Flexi SIP may encourage investors to over-invest during market highs, increasing their risk exposure.

StepUp SIP: Pros and Cons

Pros:

1. Gradual investment increase: Step-Up SIP allows investors to gradually increase their investment amount, reducing the impact of market volatility on their investments.
2. Capitalizes on market opportunities: With the gradual increase in investment, Step-Up SIP allows investors to capitalize on market opportunities and grow their wealth.

Cons:

1. Fixed investment trajectory: With a fixed investment trajectory, Step-Up SIP may miss out on market opportunities if the investment amount does not keep pace with market growth.
2. Higher investment amount in later years: Step-Up SIP may require a higher investment amount in later years, which may not be feasible for some investors.

Different Types of SIP in Nepal: Conclusion

As you can see, SIP is a great way to invest and accumulate wealth over a period of time. It is important to choose the right type of SIP as per your investment goals and risk appetite. It is also important to consult a financial advisor before starting a SIP.

In conclusion, SIP is a powerful investment tool that can help you accumulate wealth over time. By comparing different types of SIPs available in Nepal, you can choose the one that best suits your investment goals and risk appetite. It is important to consult a financial advisor before starting a SIP and also to be aware of the historical examples of SIPs available in Nepal.

It’s important to note that, while each type of SIP has its advantages, it also comes with its own set of disadvantages. For example, Flexi SIPs can be beneficial for investors who want to have more control over their investments, but it also requires more active monitoring of the investments. Similarly, Trigger SIPs can be beneficial for investors who want to take advantage of market opportunities, but it also requires more active monitoring of the market. Therefore, it’s important to choose the type of SIP that best suits your investment goals and risk appetite, and also to have a good understanding of the markets.

If you have any doubts about different types of SIP available in Nepal, feel free to ask in the comment section below!