What is a SIP?
A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund at regular intervals — usually monthly — through an automatic bank mandate (NACH / UPI AutoPay). It is the simplest way to build wealth with discipline.
- Start with as little as ₹100–₹500 per month.
- Choose daily, weekly, monthly or quarterly frequency.
- Pause, increase, or stop anytime (except ELSS lock-in rules per instalment).
Rupee-cost averaging
Because you invest the same amount every month, you automatically buy more units when prices are low and fewer units when prices are high. Over time, this lowers your average cost.
| Month | Investment | NAV | Units bought |
|---|---|---|---|
| Jan | ₹5,000 | ₹50 | 100.0 |
| Feb | ₹5,000 | ₹40 | 125.0 |
| Mar | ₹5,000 | ₹25 | 200.0 |
| Apr | ₹5,000 | ₹40 | 125.0 |
| Total | ₹20,000 | Avg NAV ₹38.75 | 550 units → avg cost ₹36.36 |
Your average cost (₹36.36) is lower than the average NAV (₹38.75) — that's rupee-cost averaging at work.
The power of compounding
Returns earn further returns. The longer you stay invested, the more dramatic the effect.
| ₹5,000/month @ 12% p.a. (assumed) | Total invested | Estimated value |
|---|---|---|
| 10 years | ₹6.0 lakh | ≈ ₹11.6 lakh |
| 15 years | ₹9.0 lakh | ≈ ₹25.2 lakh |
| 20 years | ₹12.0 lakh | ≈ ₹50.0 lakh |
| 25 years | ₹15.0 lakh | ≈ ₹95.0 lakh |
Formula: FV = P × [((1 + i)n − 1) / i] × (1 + i), where P = monthly amount, i = monthly rate, n = number of months. Try our SIP Calculator.
Types of SIP
- Regular SIP — fixed amount, fixed date.
- Step-up / Top-up SIP — increase the amount every year (e.g. 10%) as income grows. Hugely boosts final corpus.
- Flexible SIP — change the amount based on cash flow.
- Perpetual SIP — no end date until you stop it.
- Trigger SIP — invests when a condition (index level, NAV) is met.
Related: SWP & STP
- SWP (Systematic Withdrawal Plan) — withdraw a fixed amount monthly; great for retirement income.
- STP (Systematic Transfer Plan) — move a lump sum gradually from a debt/liquid fund to an equity fund.
SIP tips for maximum results
- Start early — time in the market beats timing the market.
- Link each SIP to a goal (house, education, retirement).
- Use direct plans to save on commissions.
- Step up SIPs by 10% every year.
- Never stop SIPs in a market crash.
- Review once a year; rebalance when needed.
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Educational content only — not investment advice. Rules and tax rates mentioned are as understood at the time of writing and may change; verify with official sources (SEBI, RBI, Income Tax Dept.) or a qualified adviser.