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SIP (Systematic Investment Plan)

I Know My Goal I Want to Invest

I need Rs.

5L 5Cr

I wish to invest per month

5K 5L

No. of years

1Year 30Years

Expected Return

8% 15%

Monthly SIP Amount

1,42,922

Invested Amount

1,42,922

Wealth Created

1,42,922

Start a SIP

Now, make every rupee count. Invest in a Systematic Investment Plan (SIP) and watch your regular contributions grow into a substantial corpus, helping you secure a financially stable future.

Systematic Investment Plan in Mutual Funds can serve as an easy entry point into the market and help you build your wealth steadily and strategically.

Whether you are a first-time investor or an experienced one, an SIP is one of the best tools for navigating the investment market with confidence and building a legacy for yourself and your loved ones.

What is SIP?

SIP, short for Systematic Investment Plan, is a popular investment strategy that involves investing a fixed amount in mutual funds at regular intervals, such as daily, weekly, monthly, or quarterly.

Catering to various risk appetites, investment horizons and financial goals, SIP investment allows you to overcome timing the market and supports long-term savings and wealth creation.

No need to time the market:
Many investors want to avoid the hassle of timing the market or decide the right time to invest in the market. So, they opt for SIPs which will allow them to start a long-term investment anytime and continue investing, irrespective of whether the market is facing a high or a low.

Rupee Cost Averaging:
One of the major benefits of SIP is benefit of rupee cost averaging. Here, one need not worry about the market dynamics; instead, the SIP amount invested in the mutual fund will purchase more units during a market low and fewer units during a market high.

Low investment cost:
SIPs are also generally preferred by investors since one can start with an investment as low as Rs. 500 each month. Hence, even low-risk investors not wanting to invest a large amount of money can opt for a mutual fund as per their risk profile and start a small but steady investment.

Power of compounding:
By investing on a regular basis through a SIP, one’s investment can grow due to compound interest as the returns are reinvested. If you choose to invest for an extended time-period (say three years or more), these reinvested returns can grow through the power of compounding.

Ease of investment:
Most investors may not have the time or the in-depth knowledge required for structuring one’s portfolio. SIP is a simple mode of investment, where one can give standing instructions to their bank and at regular intervals, the SIP amount will be invested in a mutual fund of their choice.

How does SIP work?

Step 1: You can choose a mutual scheme aligning with your financial goals and decide on the investment amount and frequency.

Step 2: Once the SIP set-up is initiated, the decided SIP investment amount is automatically deducted from your account and invested by the fund manager in a portfolio of stocks as the scheme’s objective.

Step 3: This fund allocation provides you with a specific number of units which depends on the SIP investment amount and NAV (Net Asset Value).

Step 4: As the scheme NAV increases, the value of the units you hold in an SIP investment plan also increases, thereby growing the invested amount and resulting in steady wealth accumulation.

Features & Benefits of SIP investment plans

Rupee cost averaging:

Systematic Investment Plans use the concept of rupee cost averaging to reduce the impact of market fluctuations. Regular investing in SIP ensures that you buy more units when prices are low and fewer units when prices are high. This averages costs over time and helps mitigate market volatility with greater confidence.

Disciplined and consistent investing:

SIP promotes investment discipline, helping you avoid emotional decisions. This consistent SIP investment rhythm develops wealth creation habits and ensures continuous progress toward financial goals.

Professional fund management:

SIPs offer expert management of funds by trained and experienced fund managers. SIP investment plan allows you to enjoy reduced risk while capitalising on opportunities by leveraging their research, analysis and market knowledge.

Long-term wealth creation through compounding:

Systematic investments in Mutual Fund SIP help you harness the power of compounding, generating significant SIP returns over time. By starting early and staying invested in an SIP Mutual Fund, you can effectively maximise returns and build wealth through compounding growth.

Option to temporarily halt investments:

Systematic Investment Plans come with the flexibility to stop your daily, weekly, quarterly or monthly contributions for a specific period and resume on a later date. This allows you to effortlessly manage financial emergencies without affecting your long-term investments.

Start with small:

Systematic Investment Plans does not require high initial investments. You can start an SIP with as low as ₹100. This empowers you to scale up your investments as income grows, maximise returns through increased contributions and take advantage of market opportunities.

Why you should invest through SIPs:

A SIP is a mode of investing in mutual funds of your choice steadily and systematically. It allows you to invest small amounts regularly. It is an ideal way to invest in equities. You can start with as little as Rs 500 and increase the amount as your income goes up or till you become comfortable with the idea of investing in market-linked investments.

Once you set up a SIP in a mutual fund of your choice, a fixed amount gets deducted monthly from your savings bank account on the date chosen by you. The money gets invested automatically in the mutual fund scheme selected by you. This ensures that you are spared tracking the market and its impact on your investment. Since you are investing regularly, essentially the amount is invested at varied price levels.. This in turn reduces the fluctuation in returns.

SIP offers flexibility to increase/decrease the amount. As your salary rises, increase the SIP amount to match it. If at any point in time you are facing a cash crunch, you can reduce the amount, or even stop the SIP temporarily. This offers a complete control over your investments. Each monthly instalment gets added to the earlier one and you earn returns on a higher base each month, generating higher returns.

Benefits of SIP

An ideal solution to the new dreams: One can plan different life goals be it conventional goals such as children’s future, retirement, international holiday, holiday home, etc or the new age ones which are specific to the age group.

Convenience for the busy generation: In SIP, a fixed amount gets invested automatically at a fixed interval. One doesn’t need to spend time on a regular basis to put the money to work.

You decide when, where, how much: SIP allows one to choose the frequency (monthly / quarterly / yearly) the debit date, investment amount, tenor, and one or many schemes to invest.

Stay worry-free: The biggest benefit of SIP is that you don’t need to worry about timing the markets. Just stay invested irrespective of the market conditions. In doing so, you end up getting more units when the markets are down and fewer units when the markets are on the swing. This in turn leads to a lower average cost per unit over time which is also called as rupee cost averaging.

Save regularly: The only way to achieve your financial goals is to save regularly. At times, you may get derailed by unexpected expenses. While you cannot avoid emergency expenses, ensure that other planned expenses are met from funds left after your savings. SIP is the best way to ensure this. It brings discipline by automating savings. You can use SIP to save for your emergency fund, to build a buffer for medical expenses and so on.

Experience the 8th wonder - the power of compounding: With SIP route, one can stay invested for a longer period of time. Over time as your investment generates returns, the returns get added to the principal amount and this in turn generates more returns. This process gets repeated leading to a big corpus. That’s how the magic of compounding works. An investor starting out early can earn much higher returns than a one starting out late even with a slightly higher corpus.

Types of Systematic Investment Plan

Fixed SIP: This is the most simple and preferred type of SIP where you periodically invest a set amount in a mutual fund scheme, irrespective of market conditions. This fixed SIP investment strategy makes it ideal for investors seeking long-term financial stability and predictable returns.

Flexible SIP: A flexible SIP allows you to adjust the amount of your SIP contributions according to your changing financial needs. This type of SIP Mutual Fund offers control and enhanced financial flexibility, making it suitable for those with fluctuating expenses and irregular income streams.

Perpetual SIP: This is an open-ended SIP that comes with no end date. A perpetual SIP investment plan enables you to invest indefinitely, ensuring steady wealth growth, reduced timing risks and long-term financial stability. This type of SIP is best suited for individuals seeking an investment instrument for retirement planning or wealth accumulation.
Note:Perpetual SIP Mutual Funds are now limited to 30 years as specified by NACH (National Automated Clearing House).

Trigger SIP: A trigger SIP allows you to automate your contributions based on specific, predefined market conditions or triggers, such as stock prices, index levels or other similar events. This type of SIP investment offers the opportunity to capitalise on market fluctuations, ultimately enhancing portfolio performance. It is particularly ideal for active investors and market-savvy individuals.

Step-up SIP: This Systematic Investment Plan offers a facility that lets you increase your investment amount at predetermined intervals. A step-up SIP investment plan helps you combat inflation and synchronise your savings with rising income by regularly boosting the amount of contributions. This type of SIP is an attractive option for high-income individuals, young investors and individuals expecting annual increments in their earnings.

Value averaging SIP: A value averaging SIP involves investing varying amounts based on your portfolio’s value and investment goals. This type of SIP investment reduces timing risks and smooths out price fluctuations by investing more when the market is low and less when it is high. A value-averaging SIP is well-suited for risk-averse and conservative investors seeking stable returns.

What to keep in mind when investing via a SIP?

Choose the SIP Duration
The tenure of the SIP should be considered based on your risk profile and the time horizon for your goal. Ideally, keep track of your SIP and review the progress of your long-term investment on a regular basis as well as over a period of 5 years.

Select a Fund House
As an investor, go with a reputed and experienced fund house. The performance of the fund house indicates what measures they take to handle the market fluctuations such that you, as an investor, do not feel the impact. Hence, it is as important as your choice of a particular mutual fund scheme.

7 mistakes to avoid when investing in SIP

These are some of the common mistakes many new investors are likely to make when they start a SIP:

Not boosting your SIP
Make it a point to boost your SIP funds with a lump sum amount in the same portfolio whenever you can afford to do so. When you opt for a combination of regular funds and SIP, the returns will be greater than that of a regular SIP.

Choosing a high investment
Choose an investment amount that you can continue to invest over the years on a regular basis. By choosing a higher investment amount, you may not be able to make the investment in the SIP during a financial emergency. Ensure that the SIP amount fits your budget so that you are able to continue with the investment for the long term.

Opting for the wrong fund
Conduct thorough and adequate research on the type of funds you would like to invest in. These should be based on factors such as your risk appetite, investment goals, expected returns and so on. Ensure that if you have long-term goals, the fund of your choice should be a long-term investment.

Setting unrealistic goals
Know what returns to expect from your investment. Even when the market is considerably stable, most funds generate returns of 10% - 15%. However, if you assume that the fund of your choice will generate much higher returns without knowing its average returns, there may be a chance of making a loss.

Preferring only lump sum investment over SIP
SIP is not meant only for small investors who don’t have a lump sum amount to invest. Even seasoned investors opt for investing via SIPs because they can benefit from rupee cost averaging. This means their investment can buy more units during market lows and fewer units during market highs, which is not the case when investing at one go.

Making short-term investments
When you choose a Systematic Investment Plan, the time period of the investment or the investment tenure is a more important factor than the investment amount. Since your SIP funds grow over the years, it is always advisable to opt for a long-term SIP than a short-term one.

Things to consider while starting SIP

These are some of the common mistakes many new investors are likely to make when they start a SIP:

Financial objectives: Establish clear investment goals, such as children’s education, wealth creation or retirement planning, to guide your SIP plan selection.
Risk tolerance: Assess your risk appetite to determine the most suitable Mutual Fund SIP investment. This will help you maximise returns and minimise risks at the same time.
Investment horizon and amount: When starting a SIP in Mutual Fund, it is important that you consider your liquidity needs and financial capacity.
Expense ratio and fees: To make the best out of your investment, opt for a mutual fund that has lower expense ratio and exit load.

Invest in SIP

Frequently Asked Questions

01. Should I invest in SIP for long-term financial growth?

Yes, you can invest in SIPs for long-term financial growth. The SIP amount you choose to invest at regular intervals in a mutual fund scheme of your choice will help you earn market-adjusted returns. However, ensure that the mutual fund scheme is a long-term investment for over 5 years.

02. What is the minimum and maximum amount I can invest in SIP?

SIP can start with an amount as low as ₹500 to ₹1000 per month, and you can choose the maximum SIP amount as per your affordability and investment goals.

03. Can I miss the payment of SIP?

Yes, you can skip up to three consecutive SIP installments during investment tenure. If you miss any further SIP installments, then your mutual fund investment will be terminated. But as far as possible, it is advisable to not miss any SIP payments.

04. How safe is it to invest in SIP?

SIP is a safe way to invest in mutual funds. This is because the market highs and lows do not greatly affect your investment; during a market high, your SIP will buy lesser units in the market, while more units will be purchased during a market low.

05. Do all SIP offer tax benefits?

Only Equity-Linked Savings Schemes offer tax benefits of up to ₹1.5 lakhs under Section 80C of the Income Tax Act. This is applicable irrespective of whether the investment is via SIP or lump sum mode.

06. Can I withdraw my SIP anytime?

You can withdraw your SIPs anytime unless the fund has a lock-in period. For example, an ELSS fund has a lock-in period of 3 years while some debt funds also have lock-in periods.

07. Should I start a SIP when the market is high?

You can start a SIP any time; however, during a market high, your SIP amount will buy fewer units as opposed to when the market is low.

08. Is SIP good for the long term?

Yes, SIPs are good for long-term investments as they provide maximum returns based on the duration of your investment tenure.

09. How to redeem SIP mutual funds online?

When you want to redeem your mutual fund units, you can submit an online request to your fund house. After the due process is complete, you will be able to redeem your units which will be based on the Net Asset Value on the day of the withdrawal.

10. How to calculate SIP returns?

Calculating SIP returns in today’s day is simple as you can use an online SIP calculator, which will help you calculate the estimated returns on your investment based on your investment amount, investment tenure, the rate of return and some other factors.

11. What is the average return on SIP?

The average returns on a SIP will depend on the type of mutual fund you choose, the market conditions and many other factors.

12. How can I extend my SIP duration?

Once your SIP tenure reaches its end, you can choose to renew the investment through an online renewal form where you can fill in the desired SIP duration for an extension.

13. How to shorten SIP duration?

To reduce the SIP duration, you can submit a written application to your fund house and if you have an online account, you can submit a request online too.

14. What is meant by rupee cost averaging?

When you start a SIP with a fixed sum of money at regular intervals, the market conditions do not affect your investment greatly. If the markets are high, your investment will buy lesser units and when the markets are low, more units will be purchased. This approach is known as rupee cost averaging.

15. What is the minimum amount to invest in SIP?

The minimum amount to invest in SIP is ₹100.

16. How to automatically renew the SIP?

To automatically renew your SIP plan, you have to set auto-renewal at the time of starting an SIP or at least 30 working days before the existing SIP tenure expires.

17. Can you increase the duration of SIP?

Yes, you can Increase the duration of SIP depending on the terms and conditions stipulated by the Asset Management Company (AMC) managing your SIP.

18. What is the difference between Top- up SIP and SIP?

A top-up SIP refers to an SIP that allows you to increase your initial SIP investment amount by a fixed amount at regular intervals. In contrast, a Systematic Investment Plan involves investing a fixed amount at regular intervals.

19. What is meant by “Rupee Cost Averaging?

Rupee cost averaging is a way of investing where you put in a fixed amount of money at regular intervals. This helps reduce the risk of timing the market, as you invest steadily, regardless of market fluctuations. This allows you to benefit from volatile markets by purchasing more units during downturns and fewer units during upswings.