Guides / What Is a SIP and How Does It Work?

What Is a SIP and How Does It Work?

A SIP (Systematic Investment Plan) lets you invest a fixed amount in a mutual fund every month, like a recurring deposit but in a market-linked fund. You can start with as little as ₹500 in many funds.

How it works

Each month your bank account is debited and the money buys units of the fund at that day's price. When prices are low you get more units, and when prices are high you get fewer. Over time this averages out your cost, which is called rupee cost averaging.

Example

The estimated gain is about ₹5.6 lakh. Try your own numbers in the SIP Calculator.

Why people like SIPs

1. Discipline: the investment happens automatically.
2. Small start: you do not need a large sum.
3. Less timing worry: you invest through ups and downs.
4. Flexibility: you can usually pause, stop or increase it.

Things to remember

• Returns are not guaranteed. The 12% above is an assumption, not a promise.
• Equity funds can fall in the short term. SIPs work best over 5 years or more.
• Raise your SIP as your income grows. See the Step-up SIP Calculator.

This is general information, not financial advice.