SIP

How it works

A Systematic Investment Plan automates investing a fixed amount at regular intervals — typically monthly — into a mutual fund. On the chosen date, the amount is auto-debited from your bank and units are bought at that day's NAV. Because you invest the same rupee amount each time, you buy more units when prices are low and fewer when prices are high — a discipline called rupee-cost averaging that smooths out your purchase price over market cycles.

Why it matters

SIPs are the single most powerful wealth-building habit for ordinary Indians. They remove the impossible task of timing the market, enforce discipline, harness compounding over decades, and let you start with as little as ₹500 a month. Started early and continued through ups and downs, a modest SIP can grow into a substantial corpus for retirement, a home or a child's education.

In India

SIPs have transformed Indian investing — monthly SIP inflows now run into very large numbers, providing a steady domestic buying cushion that stabilises the market even when foreign investors sell. They're set up in minutes on Groww, Zerodha Coin, Kuvera or directly with AMCs. Equity-fund SIPs held over a year enjoy favourable LTCG tax (12.5% above ₹1.25 lakh annual exemption).

Common mistakes

The biggest mistake is stopping SIPs during a market crash — exactly when you should keep buying cheap units. Others chase last year's top-performing fund instead of staying consistent, or expect quick returns and quit in a flat year. Note that SIP returns are measured by XIRR, not CAGR. The winning formula is boringly simple: pick a sensible, low-cost fund, automate the SIP, stay invested for the long term across market cycles, step up the amount as your income grows, and ignore the daily noise. The discipline of doing nothing dramatic, month after month, is precisely what makes SIPs so effective.