Why Should You Invest in SIP?
Meet Hemant, a Teacher
Hemant has 3 major financial goals:
-
Buy a car (₹12 lakh in 5 years)
-
Buy a house (₹50 lakh in 10 years)
-
Save for his daughter’s wedding (₹50 lakh in 15 years)
By investing through SIPs, Hemant can meet each goal with manageable monthly contributions:
-
₹14,800/month for the car
-
₹22,300/month for the house
-
₹10,500/month for the wedding
But what if Hemant delays his SIPs? The cost of delay calculator shows that even a 3-year delay increases his required monthly investment drastically. For example, his car goal jumps to ₹27,900/month.
- Insurance Companies
- Mutual Funds
|
Returns |
| Fund Name |
5 Years |
7 Years |
10 Years |
| Axis Max Life |
32.5% |
21.1% |
|
| Tata AIA Life |
30.5% |
21% |
|
| Bajaj Allianz |
22.06% |
12.91% |
|
| HDFC Life |
23.81% |
14.86% |
|
| Canara HSBC Life |
16.83% |
9.98% |
|
| Bharti AXA |
20.53% |
14.58% |
|
| Birla Sun Life |
24.11% |
14.42% |
|
| ICICI Prudential Life |
20.29% |
13.16% |
|
| LIC India |
10.54% |
- |
|
| PNB MetLife |
21.8% |
16.38% |
|
Fund rating powered by
Last updated: Jul 2025
| |
Returns |
| Fund Name |
3 Years |
5 Years |
10 Years |
| QUANT |
23.92% |
31.48% |
|
| PARAG PARIKH |
20.69% |
26.41% |
|
| EDELWEISS |
22.34% |
24.29% |
|
| KOTAK |
24.64% |
25.01% |
|
| MIRAE ASSET |
19.74% |
24.32% |
|
| PGIM INDIA |
14.75% |
23.39% |
|
| DSP |
18.41% |
22.33% |
|
| CANARA ROBECO |
20.05% |
21.80% |
|
| SUNDARAM |
18.27% |
18.22% |
|
How SIP Helps Hemant:
-
Makes investing easier through small monthly contributions
-
Offers long-term wealth creation with equity growth
-
Reduces risk via market averaging
-
Provides tax benefits under Section 80C
SIPs not only simplify financial planning but also help investors like Hemant stay consistent and future-ready.
How to Invest in SIP?
You can invest in SIP plans for ULIPs and mutual funds through online, mobile, or offline methods.
-
Online Steps
-
Visit the official website of the chosen fund house or aggregator platform.
-
Register or log in to your account.
-
Select the mutual fund or ULIP plan you wish to invest in.
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Choose the SIP option and specify details like amount, frequency, and tenure.
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Complete the KYC process (if not already done).
-
Make the payment via net banking, UPI, or debit card.
-
Mobile App Steps
-
Download the fund house or investment app.
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Log in or create an account.
-
Find the desired ULIP or mutual fund.
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Select the SIP option and set investment details.
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Verify your KYC details.
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Confirm the setup using in-app payment options.
-
Offline Steps
-
Visit the branch office of the fund house or consult a financial advisor.
-
Fill out the SIP registration form with plan and payment details.
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Submit KYC documents like PAN, Aadhaar, and address proof.
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Provide post-dated cheques or opt for auto-debit by submitting a signed mandate form.
-
Collect an acknowledgement receipt for your records.
SIP Calculator
Monthly Investment
₹22.4 L
Top Funds with High Returns (Past 7 Years)
18.6%
High Growth Fund
18.2%
Top 200 Fund
14.21%
Accelerator Mid-Cap Fund II
14.24%
Opportunities Fund
10%
Equity II Fund
13.03%
Accelerator Fund
14.09%
Growth Opportunities Plus Fund
14.82%
Multiplier
11%
Equity Top 250 Fund
13.01%
Future Apex Fund
12.05%
Opportunities Fund
13.71%
Frontline Equity Fund
14.68%
Virtue II
10.72%
Pension Dynamic Equity Fund
11.76%
Equity Pension
9.89%
Blue-Chip Equity Fund
How Does SIP Work?
The SIP full form is Systematic Investment Plan, and you can understand its working by following through these points:
-
Fixed Contribution:
You decide an amount (e.g., ₹1,000/month). This fixed sum is deducted from your bank account and invested in a mutual fund scheme.
-
Units Allotment:
The money is used to buy units of a mutual fund scheme at the prevailing Net Asset Value (NAV) which changes as per market conditions. When NAV is low, you get more units; when high, you get fewer.
| Month |
Amount Invested (₹) |
NAV (₹) of the Mutual Fund Scheme |
Units Allotted (Amount Invested ÷ NAV) |
| January |
₹1,000 |
₹50 |
20.00 |
| February |
₹1,000 |
₹40 |
25.00 |
| March |
₹1,000 |
₹60 |
16.67 |
-
Power of Compounding:
Compounding provides you with returns on both your principal and earned interest.
Suppose you invest ₹5,000 monthly through a SIP in a mutual fund offering an average return of 12% per annum (CAGR). Your investment grows over time due to the power of compounding in the following way:
| Year |
Total SIP Investment (₹) |
Interest Earned (₹) |
Total Value (₹) |
| 1 |
60,000 |
3,916 |
63,916 |
| 5 |
3,00,000 |
1,16,508 |
4,16,508 |
| 10 |
6,00,000 |
4,11,797 |
10,11,797 |
| 15 |
9,00,000 |
10,35,582 |
19,35,582 |
-
Rupee Cost Averaging
| Month |
SIP Amount (₹) |
NAV (₹) |
Units Bought |
| Jan |
5,000 |
50 |
100 |
| Feb |
5,000 |
25 |
200 |
| Mar |
5,000 |
40 |
125 |
| Total |
15,000 |
Avg. NAV = 38.33 |
425 Units |
Benefits of a Systematic Investment Plan (SIP)
The key benefits of investing in a SIP investment plan are as follows:
-
You can start with a small amount and increase it as your income grows.
-
You can stop or withdraw your investment anytime without any charges.
-
Automate payments and let your money grow while you focus on other tasks.
-
Rupee cost averaging helps your investments grow steadily despite market ups and downs.
-
Fund managers handle everything, so you don’t need expertise in the market.
-
Regular SIPs help you save consistently without affecting your lifestyle.
-
You can adjust your investment amount anytime to suit your goals.
-
Set up SIPs online once and let them grow automatically.
-
SIPs spread investments over time, minimizing risks from market fluctuations.
Types of SIP Investment Plans
Following are some of the types of SIP plans in India:
-
SIP with Insurance
-
Fixed SIP
-
Flexible SIP
-
Perpetual SIP
-
Trigger SIP
-
Top-up SIP / Step-up SIP
Myths About SIP Investments
There are several myths that continue to surround SIPs, causing confusion and hesitation among new investors. Let’s debunk some of the most persistent misconceptions:
Myth 1: Poor Market Returns Mean You Should Stop Your SIP
Many investors panic and discontinue their SIPs during market downturns. However, SIPs are meant for the long haul. Markets fluctuate, but stopping your SIP during a dip can lead to missed opportunities when markets recover. Staying invested during lows often results in better average returns over time.
Myth 2: SIPs Are Risky Because They Depend on the Market
Yes, SIPs in equity funds are linked to market movements. But that’s precisely what makes SIPs powerful over time. With rupee cost averaging, you end up buying more units when prices are low and fewer when prices rise, balancing your investment cost effectively in the long run.
Myth 3: Low NAV Means Better Returns
A fund with a low NAV isn’t necessarily a better investment. NAV simply represents the price per unit; it doesn't indicate the fund’s future performance. Whether you get more units or fewer, your investment value remains the same. Focus on the fund’s consistency and benchmark performance, not just its NAV.
Myth 4: SIPs Are Meant Only for Small Investors
While SIPs offer the benefit of starting with just ₹500, they aren’t restricted to small-scale investors. High-net-worth individuals (HNIs) also use SIPs to invest large sums regularly. There’s no maximum cap on making SIPs ideal for anyone looking to invest systematically.
Myth 5: You Can’t Change Your SIP Amount
One of the most flexible features of SIPs is the ability to modify your investment amount. You can increase or reduce it depending on your financial goals or income changes just update it through your fund house or investment platform.
In Conclusion
In this article, we have covered topics like what is SIP investment, why should I invest in SIP, SIP meaning, and how to invest in SIP. SIPs help you build wealth over time through the power of compounding and reduce risks with rupee cost averaging. It is a great tool for achieving long-term financial goals with ease.
