Yearly Breakdown
| Year | Invested | Returns | Total Value |
|---|
Note: This SIP calculator works on beginning-of-month investment basis. If you invest at the beginning-of-month, your returns will be slightly higher because your money compounds for an additional month each installment.
What is SIP?
A Systematic Investment Plan (SIP) is a disciplined way of investing in mutual funds. Instead of investing a lump sum amount at once, you invest a fixed amount regularly (monthly, quarterly, etc.) over time. SIP helps in building wealth gradually by leveraging the power of compounding and reducing market risks.
How SIP Works?
- Choose a Mutual Fund – Select a suitable equity, debt, or hybrid mutual fund based on your financial goals.
- Decide Investment Amount & Frequency – Fix how much you want to invest (e.g., ₹1,000/month) and the interval (monthly, weekly, etc.).
- Auto-Debit Facility – Your bank account is linked, and the amount is automatically debited and invested in the chosen fund.
- Units Allotted Based on NAV – The amount buys units of the mutual fund at the current Net Asset Value (NAV).
- Long-Term Growth – Over time, your investment grows as you accumulate more units, benefiting from market ups and downs (rupee-cost averaging).
Example:
- You invest ₹5,000/month in a mutual fund.
- If NAV is ₹50, you get 100 units.
- Next month, if NAV drops to ₹40, you get 125 units.
- Over time, your average cost per unit balances out, reducing risk.
Types of SIP
1. Regular SIP
- Fixed amount invested at fixed intervals (e.g., ₹5,000 every month).
- Most common and simple to use.
2. Flexible SIP (Flex SIP)
- Allows increasing or decreasing the investment amount based on market conditions.
- Useful for investors with irregular income.
3. Top-Up SIP (Step-Up SIP)
- Automatically increases the SIP amount annually (e.g., by 10% every year).
- Helps in increasing investments with rising income.
4. Perpetual SIP
- No fixed end date; continues until you stop it manually.
5. Trigger SIP
- Investments are made based on predefined triggers (e.g., market levels, NAV fluctuations).
Key SIP Terms
| Term | Meaning |
|---|---|
| NAV (Net Asset Value) | Price per unit of a mutual fund. |
| Rupee-Cost Averaging | Buying more units when prices are low and fewer when high, averaging costs. |
| Compounding | Earnings generate more earnings over time. |
| Lock-in Period | Some SIPs (like ELSS) have a 3-year lock-in. |
| Exit Load | Fee charged if you withdraw before a certain period. |
| SIP Date | Fixed date for auto-debit (e.g., 5th of every month). |
Benefits of SIP
✔ Disciplined Investing – Encourages regular savings.
✔ Affordable – Can start with as low as ₹500/month.
✔ Reduces Market Risk – Averages out purchase cost.
✔ Power of Compounding – Small investments grow significantly over time.
✔ Flexibility – Pause or modify SIP anytime.
Who Should Invest in SIP?
- Salaried individuals (steady income)
- Long-term goal planners (retirement, child’s education)
- Beginners who want to start small
- Risk-averse investors (due to rupee-cost averaging)
FAQs
Is SIP better than FD?
SIP is better than FD for long-term wealth creation (10-15% returns) but carries market risk. FD is safer (5-7% fixed returns) but loses to inflation after tax. Choose SIP for goals 5+ years away, FD for short-term safety. For best results, use both—FD for emergency funds and SIP for growth.
Is SIP risk free?
SIP is not risk-free as it invests in market-linked instruments like mutual funds. Returns fluctuate with market performance, unlike fixed deposits which offer guaranteed returns. However, long-term SIPs (5+ years) reduce risk through rupee-cost averaging and compounding. Risk level depends on the fund type (equity funds = higher risk, debt funds = lower risk).