What is SIP?


A Systematic Investment Plan (SIP), more popularly known as SIP, is a facility offered by mutual funds to the investors to invest in a disciplined manner. SIP facility allows an investor to invest a fixed amount of money at pre-defined intervals in the selected mutual fund scheme. The fixed amount of money can be as low as Rs. 500, while the pre-defined SIP intervals can be on a weekly/monthly/quarterly/semi-annually or annual basis. By taking the SIP route to investments, the investor invests in a time-bound manner without worrying about the market dynamics and stands to benefit in the long-term due to average costing and power of compounding.

Benefits of SIP Investing

Power of Compounding

When you invest regularly through SIP and invest for the long term, the benefits are magnified by the compounding effect. Compounding effect ensures that you earn returns not only on your principal amount (actual investment) but also on the gains on the principal amount i.e. your money grows over time as the money you invest earns returns. And the returns also earn returns.

What is power of Compounding?

Power of compounding is a concept in which interest earned on the investment is reinvested which leads to compounding of interest and helps in long term wealth creation.

What is Top up SIP?

Top up SIP is a facility which allows an investor to increase the amount of SIP instalments by a fixed amount at pre-determined intervals.

What is the difference between Top- up SIP and SIP?

Top up SIP is a facility in which an investor can increase the amount of SIP instalments by a fixed amount at pre-determined intervals whereas SIP is a facility in which a fixed amount is invested at pre-determined intervals.


Power of Starting early

The earlier one starts saving and investing regularly, the easier it is to achieve your goals. The graph below shows the impact of beginning to invest Rs.5,000 monthly at various stages of life till the age of 60 years (assuming a return of 12% p.a.).


"5 Years’ early start result in an

additional Rs. 1.21 crore in the

final retirement corpus."

  • Amount invested via SIP
  • Value of investment on Retirement

the above graph in for illustrative purpose only.

If you start SIP at age 25, as per the illustration shown a corpus of approximately Rs. 2.76 crores can be generated at retirement. If you would have waited 5 years and started SIP at age 30, a corpus of approximately Rs. 1.54 crore would have been available to you at retirement i.e. a difference of Rs. 1.21 crore – which is the ‘cost of delaying starting SIP’.