What is SIP?
A Systematic Investment Plan (SIP) is a method of investing a fixed amount regularly in a mutual fund scheme. SIPs leverage the power of compounding and rupee cost averaging — buying more units when prices are low and fewer when high, averaging your cost over time.
SIP vs Lump Sum
Lump sum investments are better when markets are low and you expect growth. SIPs are better for salaried investors who want to invest consistently regardless of market conditions. For most retail investors, SIPs are the preferred approach as they eliminate the need to time the market.
Power of Compounding
Investing ₹5,000/month for 20 years at 12% CAGR gives you approximately ₹49.9 lakhs — on a total investment of just ₹12 lakhs. The remaining ₹37.9 lakhs is purely the power of compounding over time.
Is SIP return guaranteed?
No. SIP returns depend on the performance of the underlying mutual fund, which is subject to market risks. Historical equity returns average 10-15% CAGR in India but can vary significantly year to year.
Can I stop or pause my SIP?
Yes. Most mutual fund SIPs allow you to pause for 1-3 months or stop entirely without any penalty. Some funds may have a minimum lock-in period (e.g., ELSS funds have 3 years).
What is Step-Up SIP?
A Step-Up SIP (also called Top-Up SIP) increases your monthly investment by a fixed amount or percentage each year, aligned with your income growth. This accelerates wealth creation significantly.