What is SIP (Systematic Investment Plan) and How to Start It

In today’s world, everyone wants to save money and build wealth, but very few people know how to do it smartly. One of the simplest and most effective ways to grow your wealth is through a Systematic Investment Plan (SIP). SIP allows you to invest small amounts regularly, helping you create a large fund over time without feeling financial pressure.

💡 What is SIP?

SIP (Systematic Investment Plan) is a disciplined way of investing money in mutual funds. Instead of investing a large amount at once, you invest a fixed amount at regular intervals — monthly, quarterly, or yearly. This helps you build wealth gradually through the power of compounding and rupee cost averaging.

For example, you can invest ₹500 or ₹1,000 every month in a mutual fund scheme. Over time, your small investments grow into a big corpus.

📈 How Does SIP Work?

When you start a SIP, the money you invest is used to buy mutual fund units. The number of units you get depends on the market price (NAV – Net Asset Value) of the mutual fund at that time. When the market is low, you get more units; when it’s high, you get fewer units. Over time, this averages out your investment cost — this is called Rupee Cost Averaging.

Also, the longer you stay invested, the more you benefit from compound interest, where your returns start earning returns. This is how wealth grows steadily through SIPs.

🧮 Example of SIP Growth

Let’s say you invest ₹2,000 per month for 10 years in a SIP with an average return of 12% per annum. By the end of 10 years, your total investment would be ₹2.4 lakh, but your fund value would be around ₹4.65 lakh. That’s the power of compounding!

🏦 Types of SIPs

• 1. Regular SIP: You invest a fixed amount every month on a specific date.
• 2. Top-Up SIP: You can increase your SIP amount periodically (for example, every year by 10%).
• 3. Flexible SIP: You can increase or decrease the SIP amount as per your financial situation.
• 4. Perpetual SIP: No end date — it continues until you decide to stop it.