Mutual FundsBeginner
SIP
Systematic Investment Plan
Investing a fixed amount in a mutual fund at fixed intervals, usually monthly.
Detailed explanation
A standing instruction buys units on the same date each month at whatever the NAV happens to be. When markets fall you automatically buy more units, and when they rise you buy fewer — this is rupee cost averaging. It converts investing from a timing decision into a habit.
Formula
Future value = P × [ ((1 + i)^n − 1) / i ] × (1 + i), where i = annual rate / 12
Example
₹5,000 a month for 10 years at 12% p.a. contributes ₹6,00,000 and grows to about ₹11.6 lakh.
Why it matters
It removes the two most common retail mistakes — waiting for the 'right level' and investing only after a rally.
Key points
- Averages your purchase price across market cycles.
- Can be stepped up annually as income rises.
- Does not protect against loss in a falling market; it only spreads entry price.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.