What is a Flexi SIP? (And Who Should Use It)
Regular SIPs force you to pay the exact same amount every single month, no matter what. But what if you are a freelancer with variable income? Or what if you want to invest *more* when the stock market crashes? Enter the Flexi SIP.
Written by Rajat
Founder, StepupCalculator · 3 min read
What is a Flexi SIP?
A Flexible SIP (or Flexi SIP) allows you to change your investment amount every month without canceling your mandate. Instead of setting a rigid ₹10,000 per month, you define a Minimum Amount and a Maximum Amount. If you are aiming for a corpus of ₹5 Crores over 15 years, a Flexi SIP helps you inject lump sums into the market when you receive a massive bonus, without breaking the discipline of a monthly SIP. It allows you to navigate the volatility of the Indian market seamlessly, ensuring that you invest ₹20,000 in a bear market and only ₹5,000 in a bull market, optimizing your journey towards your financial goals.
Example: You set your regular installment at ₹10,000, your minimum at ₹5,000, and your maximum at ₹25,000. Each month, depending on a formula or your choice, the AMC will deduct an amount within this exact range.
Why Do Investors Use Flexi SIPs?
Use Case 1: Freelancers
If you run a business or freelance, your income isn't fixed. In a great month, you might earn ₹2 Lakhs and want to invest ₹50,000. In a slow month, you might only afford ₹5,000. Flexi SIP allows you to maintain investing discipline without bouncing your bank mandate during tough months.
Use Case 2: Buying the Dip
Advanced investors hate buying units when the stock market is at an all-time high. A Flexi SIP allows you to invest your "Minimum Amount" when markets are expensive, and automatically invest your "Maximum Amount" when markets crash, scoring cheap NAV units.
How Do You Set It Up?
Most major AMCs (Asset Management Companies) and broker platforms offer this feature, though they sometimes call it a "Smart SIP" or "Value SIP". Here is the exact mechanics of how it is executed:
- 1
Create a Flexi Mandate
You must approve a bank mandate (e.g. NACH or e-Mandate) for the Maximum amount. This authorizes the fund house to deduct up to that limit, even if your normal SIP is much lower.
- 2
Choose the Trigger Formula
You link the investment amount to a market metric. The most common metric is the P/E (Price to Earnings) Ratio of an index (like Nifty 50). If P/E is high, invest min. If P/E is low, invest max.
- 3
Automated Execution
Once set, you do absolutely nothing. The algorithm evaluates the market exactly 2 days before your SIP date and pulls the calculated amount from your bank automatically.
See the Math Behind the Strategy
Want to know exactly how much wealth you could build by buying the dip during a market crash? Use our crash simulator.