Systematic Investment Plan or SIP is a method of investing in mutual funds wherein an investor chooses an appropriate mutual fund scheme and invests a fixed amount at fixed intervals. SIP investment plan is about investing a small amount over time rather than making a huge amount one-time investment, resulting in a higher return.
Let’s understand better:
Suppose you want to invest in a mutual fund, and you have set aside a sum of 1 Lakh Rupees to invest in the same. Now there are two ways in which you can make this investment. Either you can make a one-time payment of INR 1 Lakh in the mutual fund, also known as lump-sum investment, or you can choose to invest via the SIP route.
You need to start an SIP of a set amount. Say Rs 500. Then Rs 500 will be deducted from your account and auto credited to the mutual fund you want to invest in, at a certain fixed date every month. This will continue till the time period the SIP is valid until you opt out.
Some of the most popular SIP fund houses for Mutual Funds in 2025 are-
- ICICI Prudential Infrastructure Fund
- SBI PSU Fund
- Motilal Oswal Midcap Fund
- HDFC Infrastructure Fund
You can check out the details on each of these on Best SIP Funds – Top SIP Mutual Funds to Invest in 2025
When to Invest in SIP?
SIP investments can be started at any given time with a preferred scheme plan for the investor (you). It’s imperative for the investor to choose a scheme which suits the long-term goals perfectly, hence there is no particular time frame within which an investor should start investing; the sooner it is, the better yield he/she may receive.
Types of SIP
Understanding the different types of SIPs available in the financial marketplace is essential to choose the right scheme as per your pre-determined goals.
1. Top-up SIP – Another name for this type of SIP is a step-up plan. This system allows you to increase your investment amount periodically so that you can invest higher each year and make the most out of your investments. For example, if you are currently doing a SIP of Rs. 5,000 monthly and the yearly top-up rate is 10%, the next year, your SIP amount will be Rs 5,500. One can generate more wealth as the investment increment takes place.
2. Flexible SIP – As the name suggests, Flexible SIP allows the investor to modify the investment scheme in terms of the amount to be invested, as per the cash flow preferences and prevailing market conditions, which must be communicated to the fund house in advance.
3. Perpetual SIP – A perpetual SIP Plan allows you to carry on the investments without a fixed time period to terminate the investment. Generally, a SIP carries a timeline of 1, 3 or 5 years. In this type of SIP, you have to keep investing until you request the fund house to stop your SIP. The main benefit with this type is that renewal worry gets removed and as the returns get compounded, more investments can be done.
4. Multi SIP – This investment plan allows one to allocate fund in different schemes of through a single SIP. For example, if you start a multi-SIP with INR 6000 in four schemes, INR 1500 will be allotted to each of them.
5. Regular SIP – The most prevalent and conventional investment plan, wherein the investor selects a fixed amount and a fixed date to invest in a mutual fund scheme. The amount gets deducted automatically from the bank account and gets invested in the chosen fund.
Apart from the above stated most popular systematic investment plans, there are many other types which can be opted and introduced. One can select one or more plans as well, if the investment amount available to invest is surplus. Other plans are Trigger SIP, SIP with Insurance and Value SIP.
Benefits of Investing in SIP
Like all other popular financial schemes floating in the market, a systematic investment plan also entails several benefits of choosing it over a lump-sum one-time investment. Though there are risks associated with this investment type too, the returns and potential benefits are undeniable, making it a hugely popular tool to multiply existing wealth.
1. Fund Management – One of the most significant implication a systematic plan offers is balanced management of the fund. When you as an investor have capital that you wish to grow further, investing the money in one of the above plans is an ideal way to stock-keep the available fund and utilize it in effective ways.
2. Disciplined Investor – SIP can be a safe investment option if you do not possess superior financial knowledge about the way the market operates. One does not have to spend time analyzing the fluctuating market movement or ponder on the right time to invest in.
3. Compounding Factor – SIP has a powerful mechanism to constantly strive to make your investments grow. The automation technique makes you focus on periodic investment system. The small amount you invest daily grows up to turn into large corpus with the contributions and the returns compounded over the years.
4. Rupee Cost Average Factor – A major benefit this sort of investment offers is the rupee cost getting averaged, thanks to the market volatility and unpredictable conditions. The fixed amount you invest by means of an SIP averages out the value of each unit. This implies that one can buy more units when the market is low and buy fewer units when the markets are high, lowering down your average cost per unit.
While any investment plan, big or small comes with its own set of terms and conditions. As an investor, one should be careful prior to selecting a plan type and seek expert advice from professional fund managers to ensure minimal risk and maximum returns. With the wide variety of SIPs available today, investors have the flexibility to choose a plan that aligns with their financial goals, income stability, risk tolerance and market understanding.
The preliminary premise is to optimize the investments as per the different stages of life, with the right investment plan being the one that matches your sensibility and risk-taking appetite.
FAQ on Systematic Investment Plan
1)What is a SIP?
The most convenient way to invest in a mutual fund scheme is through a systematic investment plan or SIP. An investor will set aside a fixed amount to be debited from the bank account on a fixed date, as per the preferred plan.
2) Can I open an online SIP account?
Yes, one can invest in SIPs online by opening an account with the fund management company of your choice. KYC (Know-your-customer) verification is required before you start a SIP into a mutual fund of your choice.
3) What is NAV in SIP?
NAV (Net Asset Value) in a systematic investment plan is the price at which the investor can buy or sell mutual fund units. The net value of mutual funds is updated on a daily basis, with the current NAV as your cost of purchase each time you invest make an installment.