A Systematic Investment Plan (SIP) lets you invest a fixed amount (e.g., ₹5,000) monthly in a mutual fund. It leverages rupee-cost averaging to reduce the impact of market volatility.
How SIP Works
You buy more units when prices are low and fewer when prices are high. Over time, this averages out the cost per unit, reducing timing risk.
Step-Up SIP
A step-up SIP increases your investment by a fixed percentage each year (e.g., 10%). This aligns with salary growth and significantly boosts long-term wealth.
SIP Returns Are Not Guaranteed
Unlike a fixed deposit, SIP returns depend entirely on the underlying mutual fund's market performance — there's no guaranteed rate. Rupee-cost averaging reduces timing risk but doesn't eliminate market risk; a SIP in an equity fund can still show a loss over short periods, especially the first 1–3 years.
XIRR: The Right Way to Measure SIP Returns
Because SIP involves multiple investments at different dates, a simple percentage return doesn't capture actual performance. XIRR (Extended Internal Rate of Return) accounts for the timing and size of every installment, giving a true annualized return — the metric most Indian mutual fund platforms display for SIP portfolios.