A Systematic Investment Plan (SIP) is simply an instruction to invest a fixed amount in a mutual fund scheme at a regular interval. It is not a product by itself; it is a way of buying units of a scheme.
Units change, the amount does not
Each month, your fixed amount buys units at that day's Net Asset Value (NAV). When the NAV is lower, the same amount buys more units; when it is higher, it buys fewer. Over time, this spreads your purchase cost. This effect is often called rupee cost averaging. It reduces the risk of investing everything at a single high point, but it does not remove market risk.
Time does the heavy lifting
Returns earned in earlier years can themselves earn returns later. This compounding is why the length of time you stay invested usually matters more than the exact month you start. Our SIP calculator lets you see illustrations at different assumed rates.
Things to keep in mind
- SIP returns are not guaranteed. Equity schemes can show negative returns over short periods.
- Pick a debit date shortly after your salary credit to avoid bounced instalments.
- For ELSS, each instalment has its own three-year lock-in.
- Review your SIP amount when your income changes; a step-up facility can help.
Before you start
Read the Scheme Information Document, check the riskometer and understand the expense ratio. If you would like help with KYC or mandate registration, get in touch.
