What Is a SIP? A Beginner’s Guide to Systematic Investment Plans

Investing can feel confusing when you’re starting out — too many terms, too many options, and too much noise. But there is one simple method that has helped millions of Indians build wealth steadily over time: SIP.

If you’ve ever heard someone say, “I’m investing through SIPs every month,” this guide will explain exactly what they mean — and how you can start too.

What Is a SIP?

A Systematic Investment Plan (SIP) is a method of investing in mutual funds where you invest a fixed amount of money at regular intervals — usually every month.

Instead of investing a large lump sum at once, SIP allows you to invest in small, consistent amounts, making investing simple, affordable, and stress-free.

Think of it as:

“EMI for your future.”

Just like you pay EMIs every month, a SIP lets you invest every month — helping you grow wealth without feeling the burden.

ow Does a SIP Work?

Every time you invest through a SIP:

1. Your chosen amount (e.g., ₹1,000 / ₹5,000 / ₹10,000) is automatically deducted.
2. The money is invested into your selected mutual fund.
3. You receive units of the fund based on that day’s NAV (price).
4. Over time, your units grow in value as markets rise.

Example

If you invest ₹5,000 every month:

• You buy more units when the market is low
• You buy fewer units when the market is high

This disciplined investing creates a powerful effect called Rupee Cost Averaging.

Why Is SIP Popular? (Top 5 Benefits)

1. Small Amounts, Big Wealth

You can start SIPs with as low as ₹100 per month.
Even small sums grow significantly over long periods due to compounding.

2. Power of Compounding

Compounding helps your money grow exponentially as your gains start earning gains.

Example:
A SIP of ₹5,000 per month for 20 years @ 12% can grow to ₹49 lakh.

3. No Need to Time the Market

SIP reduces the stress of deciding the “right time” to invest.
You automatically invest in both:

• Good markets
• Bad markets

This makes volatility work for you, not against you.

4. Highly Disciplined & Automatic

Investing every month builds financial discipline — without effort.

5. Flexibility

You can:

• Start
• Pause
• Increase
• Decrease
• Or stop your SIP anytime

No lock-ins (except ELSS funds).