Perpetual SIP: Meaning, Advantages, And Risks In Mutual Funds

Retail participation in India’s equity markets has increased over the past decade, with Systematic Investment Plans (SIPs) in mutual funds drawing growing attention from investors. One type of SIP is the perpetual SIP, which allows investors to continue investing without specifying an end date. This trend reflects a broader shift toward disciplined, long-term investing approaches that focus on regular contributions over time rather than timing the market.

Table of contents

• What is a perpetual SIP?
• How does a perpetual SIP work in mutual funds?
• Key advantages of choosing a perpetual SIP
• Understanding the risks of perpetual SIPs
• Who should consider a perpetual SIP?
• How to start a perpetual SIP with Bajaj Finserv AMC?
• Managing your perpetual SIP: Review and rebalance

What is a perpetual SIP?

A perpetual SIP is a form of SIP that does not carry a predefined end date. In this structure, the investment instruction continues indefinitely unless the investor actively chooses to terminate or modify it. A perpetual SIP does not mean a lifetime or irreversible commitment; investors retain the flexibility to pause instalments, discontinue the SIP, or redeem units at any time, subject to applicable exit loads and prevailing tax rules.

How does a perpetual SIP work in mutual funds?

The functioning of a perpetual SIP is linked to the mandate mechanism used for SIP registrations. Certain key aspects define how this investment approach operates:

• Elimination of an end date: Unlike fixed-tenure SIPs, a perpetual SIP does not specify a closing date. The instruction remains active for an indefinite period, unless manually discontinued by the investor.
• Ongoing auto-debit process: Since there is no preset expiry, the fund house continues to place auto-debit requests with the investor’s bank at the chosen frequency, provided the mandate remains valid.
• Investor control and flexibility: The term “perpetual” does not imply a lock-in. Investors may pause instalments, change the SIP amount, or cancel the mandate at any time. This ensures that while the process is automated, decision-making authority remains with the investor.

Also Read: What is 7-5-3-1 Rule in Mutual Fund SIP Investment?

Key advantages of choosing a perpetual SIP

A perpetual SIP offers certain process-related advantages by reducing the need for manual intervention, while retaining the core structure of a regular SIP.

Flexibility and convenience

One potential benefit is reduced administrative effort. Fixed-tenure SIPs may stop automatically once the end date is reached, even if the investor intends to continue investing, which may result in funds remaining idle until a new SIP is registered. A perpetual SIP helps avoid such interruptions by allowing the investment instruction to continue unless the investor chooses to stop or modify it.

Compounding power over the long-term

Because the investment does not end automatically, a perpetual SIP may suit investors who prefer to maintain a long-term investing approach without having to renew SIP instructions periodically. This feature relates to continuity of the investment process, rather than the performance of the underlying scheme.

No manual renewals required

Automating contributions may help investors stay invested through different market phases. This may reduce the likelihood of discontinuing investments during periods of market volatility due to short-term sentiment.

Averaging out market volatility

Regular investing through SIPs supports rupee cost averaging – by continuing investments across market upswings and downturns, an SIP purchases more units when markets are down and fewer when they are up. This may help average out the per-unit cost of purchases over time, although this does not eliminate market risk or guarantee returns.

Also Read: NPS vs. SIP: Which is a Better Investment Plan?

Understanding the risks of perpetual SIPs

While automation may support investment discipline, it also requires periodic oversight.

Market risks

A perpetual SIP does not alter the underlying risk profile or performance characteristics of a mutual fund scheme. If a scheme consistently underperforms its benchmark or category, continuing investments without regular review may lead to suboptimal outcomes.

Asset allocation drift

Without regular review and rebalancing, perpetual SIPs may lead to unintended changes in your overall portfolio allocation as different assets perform differently over time. Over time, market movements may cause certain investments to grow disproportionately within a portfolio. This drift could potentially increase risk exposure beyond your intended levels

For example, continued investments in a higher-risk equity category such as small cap funds may increase overall portfolio risk if asset allocation is not reviewed and rebalanced periodically.

Changing financial goals

An investor’s financial goals, income levels, and responsibilities may evolve over time. A perpetual SIP may overlook these changes if contribution amounts or scheme choices are not reviewed or adjusted. Additionally, if SIP amounts are not revised periodically, they may not keep pace with inflation.

Who should consider a perpetual SIP?

A perpetual SIP may be considered by investors with long-term investment horizons, depending on individual circumstances.

• Young professionals: Individuals at early stages of their careers with long-term financial objectives may explore this approach to build disciplined investing habits.
• Investors seeking long-term accumulation: Those aiming for potential wealth creation over time without a defined exit date may consider a perpetual SIP, subject to periodic review.
• Time-constrained investors: Investors who prefer minimal administrative intervention and do not wish to track SIP expiry dates may find this structure operationally convenient.

How to start a perpetual SIP with Bajaj Finserv AMC?

The process for initiating a perpetual SIP is similar to that of a regular SIP, with a minor modification.

• Log in or sign up: Visit the transaction portal and enter your PAN details. Existing investors with Bajaj Finserv AMC will need to complete the log in process, while new investors will need to do a quick onboarding process.
• Set up autopay/e-mandate registration: Investors may need to finalise the e-mandate or NACH registration to enable automated deductions from their bank account.
• Select a mutual fund scheme: Investors may begin by identifying a mutual fund scheme aligned with their risk appetite, investment horizon, and financial objectives.
• Decide investment details: The SIP amount and debit date may be selected based on cash flow preferences.
• Specify tenure: When choosing the SIP tenure, choose ‘Until I stop’ instead of specifying the number of investments.

Also Read: How to choose suitable schemes for multiple SIPs?

Managing your perpetual SIP: Review and rebalance

Periodic review remains important even for automated investments. Investors can review their SIP-linked investments at regular intervals, such as once a year, to assess alignment with financial goals and risk tolerance. As income levels change, SIP amounts may also be revised. Portfolio rebalancing may help manage risk exposure over time.

Conclusion

A perpetual SIP may help investors maintain continuity in long-term investing by reducing interruptions. However, automation should be complemented with periodic reviews to ensure continued alignment with evolving goals, risk tolerance, and market conditions. Like all mutual fund investments, perpetual SIPs remain subject to market risks.

FAQs

What is the main difference between a regular SIP and a perpetual SIP?

A regular SIP is registered for a fixed tenure, after which it stops automatically. A perpetual SIP continues indefinitely until the investor manually discontinues it.

Can I stop a perpetual SIP at any time?

Yes. Investors may cancel or modify a perpetual SIP mandate at their discretion.

Are there any additional charges for a perpetual SIP from Bajaj Finserv AMC?

There are no separate charges for selecting a perpetual SIP. Investors continue to bear the applicable expense ratio of the mutual fund scheme.

Is a perpetual SIP tax-efficient? Which tax rules apply?

The perpetual nature of a SIP does not change the applicable tax treatment. Taxation depends on the type of mutual fund scheme, in line with prevailing tax regulations.

What happens if I miss a perpetual SIP instalment?

If sufficient balance is not available in the bank account, the instalment may fail. Subsequent instalments may continue as per the mandate, subject to bank and mandate rules.