Systematic Investment Plan (SIP)
A SIP is one of the simplest and most effective ways to invest in mutual funds. Instead of investing a large amount at once, you invest a fixed amount regularly — typically monthly.
How SIP Works
When you set up a SIP, a fixed amount is automatically deducted from your bank account and invested in your chosen mutual fund on a specific date each month.
Benefits of SIP
- Rupee Cost Averaging: You buy more units when prices are low and fewer when prices are high, averaging out your cost over time
- Power of Compounding: Your returns earn returns, creating a snowball effect over time
- Disciplined Investing: Automatic deductions build a savings habit
- Start Small: Begin with as little as ₹500 per month
- Flexibility: Increase, decrease, pause, or stop your SIP anytime
SIP Example
If you invest ₹5,000 per month in a mutual fund that gives 12% annual returns, after 10 years you would have approximately ₹11.6 lakhs — while having invested only ₹6 lakhs!