Mutual Fund Unlocked: Perpetual SIP

Investing in mutual funds through systematic investment plan (SIP) mode, gives the option to investor for the horizon of the investment like 3 years, 5 years, 10 years, or perpetual.  Opting the option of predefined period, the investment are automatically deducted through ECS (Electronic Clearing Service) made for the particular time and get stopped after the completion of such a period. In the case of perpetual SIP the investment will continue for the lifetime and to stop it investor need to inform AMC by filing closure form.  

Perpetual SIPs state to be the SIP’s with no tenure and end date. Most of the fund houses/ AMC’s  consider such SIPs to last till 2099 unless an investor gives a specific instruction to stop them. These SIPs aim at ensuring investment discipline and continuity.

Investing by Opting the method of perpetual SIP should be done cautiously as it also requires investor to monitor funds’ performance from time to time. Failing to do so may hamper the returns of the investor.

Performances of mutual funds can deteriorate due to many reasons, such as changes in fund management, investment objective etc. A perpetual SIP without proper and periodic evaluation would lead to continued investments in an underperforming fund. Though perpetual SIP is good option for the disciplined continued investment it won’t be very useful the investors who are near to the retirement or retired. At this stage investor should review and rebalance the portfolio and start withdrawing the specific amounts monthly to fulfil regular income needs. However the younger investors (below 35) can opt for the perpetual SIP’s.