A Systematic Investment Plan (SIP) is a way of investing a fixed amount in a mutual fund scheme at regular intervals, usually every month. Instead of trying to pick the right day to invest a large sum, you invest small amounts consistently over time.

How a SIP works

On each SIP date, the amount is debited from your bank account and units are allotted at that day’s Net Asset Value (NAV). When NAVs are lower, the same amount buys more units; when NAVs are higher, it buys fewer units.

What is rupee cost averaging?

Because you buy more units when prices are low and fewer when prices are high, your average cost per unit over time may be lower than the average NAV over the same period. This is called rupee cost averaging.

SIPs encourage discipline. They do not assure profits or protect against losses in falling markets.

Benefits of investing through SIPs

  • Discipline: automatic debits build a regular investing habit.
  • Affordability: many schemes accept SIPs from ₹500 a month.
  • Flexibility: you can usually increase, pause or stop a SIP as per AMC rules.
  • Compounding: staying invested longer gives returns more time to compound.

Things to keep in mind

  • SIP returns depend entirely on the performance of the underlying scheme.
  • Missed instalments may lead to bank charges and SIP cancellation.
  • Choose schemes after reading the Scheme Information Document and checking the riskometer.

Use our SIP calculator to see illustrative outcomes for different amounts and time periods.

Disclaimer: This article is for investor education only and is not investment, tax or legal advice. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Tax rules are subject to change.