A Systematic Investment Plan invests a fixed amount at a fixed interval, usually monthly. Because the amount is fixed and the NAV varies, you automatically buy more units when prices are lower and fewer when they are higher.
What a SIP genuinely does
- It removes the need to decide when to invest, which is a decision most people make poorly.
- It spreads your purchase price across many points in a cycle.
- It converts investing into a habit tied to your income rather than to market news.
What a SIP does not do
- It does not assure a return. If the market is lower when you need the money, your investment is worth less.
- It does not remove market risk - it changes when you take it on, not whether.
- It does not always beat a lump sum. In a steadily rising market, investing earlier would have done better.
Step-up SIP
A step-up increases the monthly amount by a set percentage each year, usually tracking income growth. Over a long period the difference in the invested total is substantial, which the SIP calculator on this site lets you model directly.
Educational content. This article explains general concepts. It is not investment advice, does not recommend any security or scheme, and takes no account of your personal circumstances. Investments in securities are subject to market risks.