What is a SIP? A simple guide for beginners

What a Systematic Investment Plan is, how it works, its benefits and its risks, explained in plain language.

The basics

A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund scheme at regular intervals, most often every month. The amount is debited from your bank account on the chosen date and used to buy units at that day's NAV (net asset value).

How it works

When the NAV is low, your fixed amount buys more units. When the NAV is high, it buys fewer. Over time this averages your purchase cost, which is often called rupee cost averaging. It does not guarantee a profit or protect against loss.

Who may find it useful

People who earn monthly and prefer to invest in small, regular amounts rather than choosing a day to invest a large sum. Many start with as little as ₹500 a month, depending on the scheme.

Things to remember

Mutual fund investments are subject to market risks. Returns are not guaranteed and can be negative. Choose a scheme that matches your goal, time horizon and comfort with risk, and read the scheme documents. A SIP can usually be paused or stopped.