Lesson 2: What is a SIP?

SIP stands for Systematic Investment Plan. The name is bigger than the idea.

A SIP is a fixed amount, invested on a fixed date, every month.

An example

You choose a fund and an amount, say ₹5,000, and a date, say the 5th. On the 5th of every month, ₹5,000 moves from your bank account into the fund. You do not have to remember, and you do not have to decide each month.

Why people use it

• It builds a habit. Saving first, before the month's spending, is easier than saving what is left.
• You start small. Many schemes accept SIPs from ₹100 to ₹500 a month.
• You do not have to guess the "right time". Some months you buy when prices are high, some when low. Over many months the price you pay averages out.

What a SIP cannot do

A SIP is a way of investing, not a type of fund. It does not guarantee a profit, and it does not protect you from a fall. If the fund's value falls for a long time, your SIP units lose value too.

You can stop a SIP, change the amount, or pause it. Doing so is your choice, and a fall in the market is the time many people are tempted to stop.

See it with your own numbers

Try the SIP calculator. Change the monthly amount, then the years, then the assumed return, and watch which one matters most. The result is an illustration, not a promise.

Next: Lesson 3: How risk works

Mutual fund investments are subject to market risks, read all scheme related documents carefully. This lesson is for education only and is not investment advice.