What is SIP (Systematic Investment Plan)

SIP Full Form

The full form of SIP is a Systematic Investment Plan.

What is SIP?

SIP is an investment method through which you invest in mutual funds and market-linked insurance plans. It allows you to invest a fixed amount regularly, like monthly or quarterly. With SIP, you do not need to time the market. Instead, your investments grow steadily over time through compounding and cost averaging. 

Since the best SIP plans are flexible, you can increase the amount or discontinue investing in the fund whenever you wish.

SIP Calculator

I know my investment amount I know my goal amount

Monthly SIP Yearly SIP Lumpsum

I want to invest Pro Tip

Financial experts suggest that a person should invest 10-15% of their monthly income for long-term financial growth

/Month

I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Total Wealth ₹22.4 L

View Plans

I want to save

I want to invest for Pro Tip

Financial experts suggest that individuals should ideally invest for a period of 5 to 10 years, or even longer, to maximize the benefits of compounding and navigate market fluctuations effectively

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Expected return Pro Tip

Top 25% of investors consistently generate more than 12% return

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Monthly Investment ₹22.4 L

View Plans

Top Funds with High Returns (Past 7 Years)

19.3%

High Growth Fund

15.61%

Accelerator Mid-Cap Fund II

15.48%

Opportunities Fund

Why Should You Invest in SIP?

1. Example of Hemant, a Teacher

   Let us understand the value of a SIP plan through Hemant’s story.

   Hemant has three big financial goals:

   • Buy a car – ₹12 lakh in 5 years

   • Buy a house – ₹50 lakh in 10 years

   • Save for his daughter’s marriage – ₹50 lakh in 15 years

   Let us explore using the SIP Calculator on how SIPs can help him achieve these goals in a simple, structured, and effective way.

2. Hemant’s Plan

   Goal 1: Buy a Car (₹12 Lakh in 5 Years)

   SIP calculator estimates that to achieve ₹12 lakh in 5 years at an assumed SIP interest rate of 12% p.a., Hemant needs to invest: ₹14,800 per month.

   Goal 2: Buy a House (₹50 Lakh in 10 Years)

   For ₹50 lakh in 10 years, Hemant must start early to reduce monthly pressure and invest per month: ₹22,300 per month.

   Goal 3: Daughter’s Marriage (₹50 Lakh in 15 Years)

   To save ₹50 lakh in 15 years, Hemant should invest: ₹10,500 per month.

What If Hemant Delays?

Delaying by 5 years means Hemant needs to invest more each month.

1. How SIP Made it Easy:

   SIPs are a smart way for Hemat to invest regularly and grow his wealth over time. 

   • Small Monthly Investments: SIPs allow Hemant to start with manageable amounts and gradually build wealth.

   • Consistent Growth: Combines disciplined investing with the power of equity.

   • Mitigates Market Volatility: Spreads investments across time, reducing risk.

   • Beats Inflation: Higher potential returns compared to bonds.

   • Tax Benefits: Some SIPs (like ULIP, ELSS, and NPS funds) offer tax-saving benefits under Section 80C.

2. How SIP Works for Hemant:

   Goal	Savings Required	How SIP Helps
   Buy a car	Medium-term goal	Regular investments grow steadily.
   Buy a home	Long-term goal	Compounding builds a larger corpus.
   Daughter’s wedding	Long-term goal	Protects against inflation with tax benefits.

By understanding what is SIP investment and leveraging the SIP full form, Hemant simplifies his financial journey while achieving consistent growth and security for his investments.

How to Invest in SIP Investment?

You can invest in SIPs for ULIP plans and mutual funds through online, mobile, or offline methods.

1. Online Steps

   • Visit the official website of the chosen fund house or aggregator platform.

   • Register or log in to your account.

   • Select the mutual fund or ULIP plan you wish to invest in.

   • Choose the SIP option and specify details like amount, frequency, and tenure.

   • Complete the KYC process (if not already done).

   • Make the payment via net banking, UPI, or debit card.

2. Mobile App Steps

   • Download the fund house or investment app.

   • Log in or create an account.

   • Search for the desired ULIP or mutual fund.

   • Select the SIP option and set investment details.

   • Verify your KYC details.

   • Confirm the setup using in-app payment options.

3. Offline Steps

   • Visit the branch office of the fund house or consult a financial advisor.

   • Fill out the SIP registration form with plan and payment details.

   • Submit KYC documents like PAN, Aadhaar, and address proof.

   • Provide post-dated cheques or opt for auto-debit by submitting a signed mandate form.

   • Collect an acknowledgement receipt for your records.

As we have got an idea about 'what is SIP' and why you should invest in SIP, let us learn the working of SIP investment.

People Also Read: SWP Calculator

How Does SIP Work?

The SIP full form is Systematic Investment Plan, and you can understand its working by following through these points: 

1. Fixed Contribution: 

   You decide an amount (e.g., ₹1,000/month). This fixed sum is deducted from your bank account and invested in a mutual fund scheme.

2. Units Allotment: 

   The money is used to buy units of a mutual fund scheme at the prevailing Net Asset Value (NAV) which changes as per market conditions. When NAV is low, you get more units; when high, you get fewer.

   Month	Amount Invested (₹)	NAV (₹) of the Mutual Fund Scheme	Units Allotted (Amount Invested ÷ NAV)
   January	₹1,000	₹50	20.00
   February	₹1,000	₹40	25.00
   March	₹1,000	₹60	16.67

3. Power of Compounding: 

   Compounding provides you returns on both your principal and earned interest.

   Suppose you invest ₹5,000 monthly through a SIP in a mutual fund offering an average return of 12% per annum (CAGR). Your investment grows over time due to compounding in the following way:

   Year	Total SIP Investment (₹)	Interest Earned (₹)	Total Value (₹)
   1	60,000	3,916	63,916
   5	3,00,000	1,16,508	4,16,508
   10	6,00,000	4,11,797	10,11,797
   15	9,00,000	10,35,582	19,35,582

4. Rupee Cost Averaging

   • Rupee cost averaging allows you to invest a fixed amount regularly, buying more units when prices are low and fewer when prices are high. It reduces the impact of market fluctuations.

   Month	SIP Amount (₹)	NAV (₹)	Units Bought
   Jan	5,000	50	100
   Feb	5,000	25	200
   Mar	5,000	40	125
   Total	15,000	Avg. NAV = 38.33	425 Units

Benefits of a Systematic Investment Plan (SIP)

The key benefits of investing in a SIP investment plan are as follows:

• Flexible Investments: You can start with a small amount and increase it as your income grows.

• No Exit Penalty: You can stop or withdraw your investment anytime without any charges.

• Saves Time: Automate payments and let your money grow while you focus on other tasks.

• Stress-Free Investing: Rupee cost averaging helps your investments grow steadily despite market ups and downs.

• No Market Knowledge Required: Fund managers handle everything, so you don’t need expertise in the market.

• Encourages Financial Discipline: Regular SIPs help you save consistently without affecting your lifestyle.

• Flexible Contributions: You can adjust your investment amount anytime to suit your goals.

• Easy to Manage: Set up SIPs online once and let them grow automatically.

• Reduces Risk: SIPs spread investments over time, minimizing risks from market fluctuations.

Types of SIP Investment Plans

Following are some of the types of SIP plans in India:

• SIP with Insurance: Invest regularly while getting life insurance coverage for added security.

• Fixed SIP: Invest a fixed amount at regular intervals to save consistently.

• Flexible SIP: Adjust your investment amount anytime based on your financial needs.

• Perpetual SIP: Keep investing indefinitely until you choose to stop.

• Trigger SIP: Set conditions to invest more when specific market events occur.

• Top-up SIP / Step-up SIP: Increase your monthly investment at regular intervals, like yearly with step-up sip investment.

• Multiple SIPs: Invest in several funds simultaneously for better diversification.

Things to Keep in Mind for Maximum SIP Returns

• Start early, and earn more significant returns.

• Stay longer, and enjoy the compounding effect.

• Be patient, the money is sure to grow in the long run.

• Be consistent, and never skip your monthly payment.

In Conclusion

In this article, we have covered topics like what is SIP investment, why should I invest in SIP, SIP meaning, and how to invest in SIP. SIPs help you build wealth over time through power of compounding and reduce risks with rupee cost averaging. It is a great tool for achieving long-term financial goals with ease.