SIP (Systematic Investment Plan) is a disciplined method of investing in mutual funds
where investors contribute a fixed amount at regular intervals (usually monthly or quarterly) instead of lump-sum. It is ideal for long-term wealth creation with the power of rupee cost averaging and compounding.
Key Features of SIP:
Investment Frequency
Usually monthly or quarterly
Minimum Amount
Starts as low as ₹100 (most common minimum is ₹500 per month)
Auto-Debit Facility
Amount is auto-debited from investor’s bank account on a chosen date
NAV Based Allotment
Units are allotted based on the day’s NAV (Net Asset Value)
Flexibility
SIPs can be paused, increased, decreased, or stopped anytime
Long-Term Returns
Encourages long-term investment in equity, balanced, or debt mutual funds
Taxation
Same as mutual fund taxation (ELSS has tax benefits under 80C)
Benefits of SIP for Investors:
Rupee Cost Averaging
Buying more units when prices are low, and fewer when high, reducing average cost per unit.
Power of Compounding
The longer the SIP continues, the more significant the compounding impact.
Disciplined Savings
Regular deductions cultivate financial discipline and savings habits.
No Need to Time the Market
Reduces the stress of market volatility and timing entry/exit.
Goal-Oriented Investing
Perfect for retirement planning, children’s education, or wealth creation.
SIP Types
Type of SIP Description
Regular SIP Fixed amount invested monthly or quarterly
Step-up SIP Increases SIP amount at a fixed interval (e.g., yearly)
Flex SIP Adjust SIP amount based on market conditions or income changes
Perpetual SIP No fixed end date; continues until manually stopped
Example Scenario (Simple Math):
₹5,000 SIP per month for 15 years
Assumed annual return: 12%
Total investment = ₹9 lakhs
Estimated corpus = ₹18.5–20 lakhs
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