Understanding SIP
SIP stands for Systematic Investment Plan. It's a method of investing a fixed amount regularly (typically monthly) in mutual funds, regardless of market conditions. Think of it as EMI, but for building wealth instead of paying debt.
The minimum SIP amount in India starts from just ₹500 per month, making it accessible to everyone. SIPs automate your investments, eliminating emotional decision-making and providing rupee cost averaging benefits.
The SIP Formula
P = Monthly Investment | r = Monthly return rate | n = Number of months
Key Benefits of SIP
Rupee Cost Averaging
Benefit: Buy more units when prices are low
Markets fluctuate. SIP automatically buys more units during dips and fewer during peaks, averaging your cost.
Power of Compounding
Benefit: Your returns earn returns
Starting early matters more than investing more. ₹5,000/month for 30 years beats ₹15,000/month for 15 years.
Disciplined Investing
Benefit: Removes emotional decisions
Auto-debit ensures you invest consistently, regardless of market news or personal spending temptations.
SIP in Action: Real Example
₹5,000 Monthly SIP for 15 Years
Wealth Created:
- Total Invested: ₹5,000 × 180 months = ₹9,00,000
- Expected Returns: ₹16,04,206
- Total Value: ₹25,04,206
Key Insight: Your ₹9 lakhs investment becomes ₹25+ lakhs—a 2.8x growth! The extra ₹16 lakhs is pure wealth created by compounding.
Types of SIP
Regular SIP
Fixed amount invested on a fixed date every month. Most common and recommended for beginners.
Step-Up SIP
Increase SIP amount annually (e.g., by 10%). Matches your growing income and accelerates wealth creation.
Flexi SIP
Vary your SIP amount based on cash flow. Good for irregular income earners like freelancers.
Perpetual SIP
No end date. Continues until you manually stop it. Best for long-term wealth building.
Common SIP Mistakes
Stopping SIP During Market Crashes
This is exactly when SIP shines! You get more units at lower prices. Stopping destroys the averaging benefit.
Too Many SIPs in Similar Funds
Having SIPs in 5 large-cap funds doesn't diversify—it just complicates tracking.
Ignoring Step-Up
Your SIP amount should grow with your income. A static SIP loses purchasing power to inflation.
Calculate Your SIP Returns
Use our advanced SIP calculator to plan your wealth-building journey.