Part of the same group
Mutual funds · SIP
A fixed amount, every month, working towards a goal.
A systematic investment plan (SIP) invests the same amount in a mutual fund scheme on a date you choose. It builds the habit and takes the question of timing off the table. It does not remove market risk.
Reviewed
In short
- Many schemes accept a SIP of a few hundred rupees a month.
- Each instalment buys units at that day’s price, so a fall buys more units.
- Raising the amount as income grows is the simplest improvement to most plans.
What averaging does, and does not do
Because the amount is fixed, instalments buy more units when prices are low and fewer when they are high, which smooths the price you pay over time. It does not guarantee a profit or protect against a fall.
Choosing the amount
Work back from the goal and the date you need the money, at a cautious assumed return — the goal planner does this. Then choose an amount you can keep paying through a bad year, because stopping in a fall is what does the damage.
Step-up SIPs
A step-up raises the instalment by a fixed amount or percentage each year, in line with your income.
SIP growth
An illustration at the rate you choose, compounded monthly. Mutual fund returns are not guaranteed and can be negative, and past performance does not indicate future returns. Mutual fund investments are subject to market risks; read all scheme related documents carefully.
What to check
These decide what you actually keep. Read them before the return figure.
Expense ratio
The yearly charge, taken out of the fund and already reflected in the price you see.
Regular or direct plan
A regular plan pays a distributor commission out of the expense ratio; a direct plan does not and costs less each year.
Exit load
A charge for leaving within a stated period, set out in the scheme document.
The riskometer
Every scheme states its risk on a six-step scale from Low to Very High.
Nomination
Register a nominee, or record that you choose not to.
Questions people ask
General guidance. The scheme document decides the specifics, and tax rules change.
How much do I need to start a SIP?
Many schemes accept a SIP of a few hundred rupees a month. The amount that matters is one you can keep paying through a bad year.
Can I pause or stop a SIP?
Yes. A SIP is an instruction, not a commitment. What you have already invested stays invested until you redeem it.
Is a SIP safer than a lump sum?
Neither is safer in principle. A SIP spreads the price you pay; a lump sum is invested sooner. Both carry market risk.
Are SIP returns guaranteed?
No. Mutual fund investments are subject to market risks, and the value can fall as well as rise.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance does not indicate future returns. Regular plans involve payment of commission to distributors.