What is Freedom SIP? How is it different from normal SIP, what are the benefits? here is the full detail

Apart from SIP, Freedom SIP is also a topic of discussion among investors. This gives the investor the freedom to get returns after the completion of the SIP tenure. Let us know how it works and what are the benefits.

You must have heard a lot about SIP. You must also know that SIP is becoming very popular among investors these days. This is because SIP of mutual funds has made people rich by giving bumper returns in a short span of time. Also, by investing in it for a long time, you can easily collect crores of funds. But have you heard about Freedom SIP? If not, today we will tell you about this new type of SIP which makes your investment more profitable and flexible. Let me tell you, ICICI Prudential Mutual Fund has introduced a unique facility in the form of 'Freedom SIP' . It combines the power of SIP with a Systematic Withdrawal Plan ie SWP. Through this, investors can grow their wealth over a period and then after completion of SIP tenure, they can manage cash flow through SWP.

How Freedom SIP works?

Freedom SIP is a complete three-step process. For this, investors have to choose a source scheme in which they will invest through SIP in 8 years, 10 years, 12 years, 15 years, 20 years, 25 years or 30 years. Since the time horizon is generally longer, investors can opt for a SIP of equity offers. After completion of tenure, the money will be transferred to a target scheme. Target scheme is the scheme from which the investor will get regular cash flow through SWP.

Understand the process in three steps

The first step is SIP. In this, you can choose any of the different schemes of ICICI Prudential, which are called source schemes. You keep doing SIP in it for 8 years, 10 years, 12 years or 15 years according to your convenience and goal.

After that comes the second step of the switch. In that you change the scheme after the completion of the first step. After completion of SIP tenure in the source scheme, you switch to another scheme, which is called the target scheme.

Now the third step is of withdrawal. The Systematic Withdrawal Plan gets activated as soon as the transfer is made from the source scheme to the target scheme. In this you choose SWP of 8, 10, 12 or 15 years. If you choose SWP for 8 years, then you get the same amount every month as you were doing SIP. And one and a half times in 10 years, two times in 12 years and 3 times in 15 years.

Understand calculation like this

Suppose an investor starts a SIP of Rs 10,000 for 10 years, then the SWP amount will be Rs 15,000. If the time limit of investment is extended to 15 years, then the SWP amount will be 30,000. If the investor continues to invest for 20, 25 and 30 years, then the SWP amount will be Rs 50,000, Rs 80,000 and Rs 1.2 lakh. As long as the units are available in the target scheme, the SWP will be processed.

Freedom SIP Benefits

Consistent Cash Flow: Freedom SIP allows investors to receive regular cash flow after completing the tenure. This helps in ensuring that investors have a steady cash flow to meet their expenses.

Flexible: Investors have the freedom to choose the source scheme, target scheme and SIP tenure. Apart from this, annual top-up is also available in this.

Helps in Maintaining Financial Discipline: This feature ensures that both SIP and SWP are done in a systematic manner thereby protecting the investor from behavioral challenges.