SIP: Systematic Investment Plan in Mutual Funds
SIP (Systematic Investment Plan) is a mode of investing in mutual funds where a fixed amount is automatically debited from a bank account at predefined intervals (usually monthly) and invested into a chosen mutual fund scheme, applying rupee-cost averaging.
Mechanics: investor sets up a mandate through bank/broker for ₹X per period (commonly monthly, also weekly/daily/quarterly). On the SIP date, units are allotted at the day's NAV — more units when NAV is low, fewer when high. Over time, this averages the purchase cost. SIPs can be fixed amount, step-up (annual % increase), trigger-based (volume on dips), or flexi-SIP (variable amount).
Minimum amounts vary by scheme: most equity funds allow ₹500 minimum SIP, some go as low as ₹100 (Nippon India Tax Saver, ICICI Prudential Bluechip). ELSS funds also follow ₹500 minimum but each installment locks in for 3 years from its date. SIP duration typically 6 months minimum, but no maximum — open-ended schemes allow perpetual SIPs. Pause/cancel anytime online.
SIP vs lump sum: empirical studies (industry data, AMFI research) show SIPs reduce regret and behavioural risk by avoiding 'all-in at the wrong time' scenarios. However, in steadily rising markets, lump sum has historically outperformed SIPs over 5+ year periods because more capital is invested earlier. SIPs match the cash flow of salaried investors and are operationally simpler. Industry SIP book crossed ₹26,000 crore monthly inflows in mid-2025.
Step-up SIP — automatically increasing SIP amount by 10% annually — significantly increases corpus over 20+ years compared to flat SIP. Most apps allow setting up step-up SIPs at registration. SIP Calculator on AMFI website (amfiindia.com) and most fund houses helps project corpus at assumed CAGR (commonly 10-12% for equity, 7-8% for hybrid).
