Last updated: October 2026 Β· 3 min read
A Systematic Investment Plan (SIP) lets you invest a fixed amount in a mutual fund every month, starting from as little as βΉ100-βΉ500 in many funds. It builds discipline and lets compounding work for you over the long term.
How a SIP works
- You choose a mutual fund and a monthly amount.
- The amount is auto-debited from your bank on a fixed date.
- You get units based on that day’s NAV (price per unit).
- Over time you accumulate units; your wealth = units Γ current NAV.
Rupee cost averaging
When markets fall, your fixed SIP buys more units; when markets rise, it buys fewer. Over time this averages your purchase cost and removes the stress of timing the market.
Illustrative SIP growth
| Monthly SIP | Years | Total invested | Value at 10% a year* | Value at 12% a year* |
|---|---|---|---|---|
| βΉ5,000 | 10 | βΉ6 lakh | about βΉ10.3 lakh | about βΉ11.6 lakh |
| βΉ5,000 | 20 | βΉ12 lakh | about βΉ38 lakh | about βΉ50 lakh |
| βΉ10,000 | 15 | βΉ18 lakh | about βΉ41.8 lakh | about βΉ50.5 lakh |
*Illustrative only, assuming steady annual returns compounded monthly. Real mutual fund returns vary and can be negative over short periods.
Types of mutual funds for SIP
| Fund type | Risk | Suitable for |
|---|---|---|
| Index funds (Nifty 50, Sensex) | Moderate to high | Low-cost long-term equity exposure |
| Large-cap / flexi-cap funds | Moderate to high | Core long-term portfolio |
| Mid and small-cap funds | High | Investors with 7+ year horizon |
| ELSS (tax-saving) | High | Old-regime 80C benefit, 3-year lock-in |
| Hybrid funds | Moderate | Balance of equity and debt |
| Debt funds | Low to moderate | Short-term goals, stability |
How to start a SIP
- Complete KYC (PAN, Aadhaar, bank details).
- Choose a platform: the fund house website, a SEBI-registered advisor, or an investment app.
- Prefer direct plans for lower expense ratios if you can choose funds yourself.
- Pick a fund that matches your goal and time horizon.
- Set up the auto-debit mandate and review once a year.
Risks and taxes
Mutual funds are subject to market risk; past returns do not guarantee future performance. Equity fund gains are taxed as capital gains: 20% if held up to 12 months and 12.5% on long-term gains above βΉ1.25 lakh a year. Each SIP instalment has its own holding period.
Frequently asked questions
What is the minimum SIP amount?
Many funds allow SIPs from βΉ100 to βΉ500 per month; SEBI has also encouraged small-ticket SIPs of βΉ250.
Can I stop a SIP anytime?
Yes. Open-ended fund SIPs can be paused or stopped; ELSS units have a 3-year lock-in per instalment.
Is SIP better than FD?
They serve different purposes: FDs offer fixed, safe returns; equity SIPs can grow more over the long term but with market risk.
Keep exploring
- Power of compounding
- Capital gains tax on shares and MFs
- PPF account explained
- More Savings & Investment articles on Tiwaripedia
This article is for general information, not financial, tax or legal advice. Rates, limits and rules change; always confirm on the official website or with a qualified advisor before you act. Spotted something that needs updating? Let us know.
