SIP & Fund Categories

When you invest in a mutual fund, there are several choices that you need to make. One of them is choosing your mode of investment. You can either invest a lump sum or take the SIP route. However, most financial advisors recommend opting for the SIP route as it offers several advantages compared to the lump sum method.

This article will discuss what SIP is, the benefits of using it to invest in mutual funds, and how you should calculate and set up your SIPs. Let’s get started.

What is SIP?

As mentioned, the SIP or Systematic Investment Plan (SIP) is a method that allows you to invest your money in mutual fund schemes. You can get started by investing a fixed amount at periodic intervals in the mutual fund of your choice. The SIP works just like a recurring deposit account offered by banks.

When you set up a SIP with a mutual fund, a fixed amount is debited from your bank account on a pre-determined date every month. This amount is then used to purchase the units of the mutual funds (as per their current Net Asset Value) chosen by you.

Benefits of investing through SIP

When you take the SIP route for investing in mutual funds, you can earn more than just good returns. Below are some advantages of investing through SIP:

Disciplined approach to investing

The most significant advantage of using the SIP method is that it allows you to make investments disciplined. You start treating your SIPs like other monthly expenses, such as house rent, groceries, utility bills, etc. This way, you make regular and consistent investments without any break.

Systematic savings

As the name suggests, SIP allows you to make systematic savings every month. And the power of compounding ensures that these savings slowly snowball into a large corpus. You can use the accumulated corpus to fulfil your various long-term goals, such as buying a house, funding your child’s education, and planning your retirement.

A high degree of flexibility

Another advantage of using the SIP method for investing in mutual funds is that it offers investors high flexibility. You can enter or exit your investment through mutual funds any time.  Moreover, you can even change the amount and date of your SIP without incurring any additional charges.

Start with a small amount

You can start your SIP investments with relatively smaller amounts and then increase them at your convenience. It means that you won’t have to compromise on your lifestyle or put any extra burden on yourself to invest through SIP. Some mutual fund schemes allow you to start a SIP with as low as Rs. 100 per month.

No need to time the market

Returns on the mutual fund are dependent on market fluctuations, and hence, the net asset value of a mutual fund scheme can move up and down daily. It can be tedious to watch the market and time your investments accordingly. However, by using the SIP method for making your investments, you are not required to time the market. You can reap the rewards of rupee cost averaging and earn higher returns.


The SIP is one of the most convenient methods to invest your money in mutual funds. You are not required to deposit a cheque or visit the AMC’s office every month. All you need to do is just fill up an auto-debit form with the merchant, and then it will automatically deduct the SIP amount from your bank account on a pre-determined date every month.

How to set up your SIP?

Setting up your SIP is easy and convenient. Below are the steps to start your SIP:

Step 1 – Analyse your investment goals. Calculate the SIP amount you need to invest every month to achieve those goals

Step 2 – Select the mutual fund you want to start your SIP. Consider several factors, such as past performance and your risk appetite, while selecting a fund

Step 3 – Complete your KYC process with the fund house. You can do it online or offline by submitting your id proof, address proof, PAN card, and a photograph

Step 4 – Choose your SIP parameters, including the amount, frequency, tenure, and SIP date

Step 5 – Sign up for auto-debit to complete your SIP registration

To sum it up

The SIP can be your ideal partner for goal-based investing in mutual funds. It allows you to invest a fixed amount at periodic intervals, monthly, quarterly, semi-annually, or annually. You can start your SIP with as low as Rs. 100 and then increase it gradually as per your other financial commitments.

If you find it difficult to determine the right SIP amount, you can use an online SIP calculator or take the help of a mutual fund advisor.

Thank you for reading this post, don't forget to subscribe!