Definition
SIP (Systematic Investment Plan)
A Systematic Investment Plan is a method of investing a fixed amount in a mutual fund at regular intervals, averaging the purchase cost and instilling investing discipline.
A SIP lets you invest a set sum — say monthly — into a mutual fund automatically, usually via a NACH e-mandate or UPI AutoPay. Because you buy more units when prices are low and fewer when high, it achieves rupee-cost averaging over time.
SIPs encourage discipline and regularity, removing the temptation to time the market, and harness compounding over long horizons. They can be started with small amounts, making investing accessible.
Returns still depend on the underlying fund and market performance; SIPs reduce timing risk but do not eliminate market risk. They are a cornerstone of goal-based investing for retail investors.
Related terms
- UPI AutoPayUPI AutoPay is an NPCI feature that lets you set up recurring payment mandates on a UPI app so approved sums are auto-debited for subscriptions, SIPs, bills and EMIs.
- Index FundAn index fund is a passively managed mutual fund that aims to replicate the performance of a market index by holding the same securities in the same proportions, at low cost.
- ELSSAn Equity Linked Savings Scheme is a tax-saving equity mutual fund that qualifies for Section 80C deduction and has the shortest lock-in among 80C options, at three years.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.