September 8, 2026
What Is SIP? A Beginner’s Guide to Systematic Investment Plans
If you have ever wondered how to start investing in mutual funds without a large amount of money, a Systematic Investment Plan (SIP) is usually the answer. A SIP lets you invest a small, fixed amount at regular intervals and build wealth step by step. In this guide we explain what a SIP is, how it works, its benefits and how you can start one.
What is a SIP?
A SIP is a way of investing in a mutual fund scheme where a fixed amount is automatically invested at a regular frequency — most commonly every month, though weekly and quarterly options also exist. The amount is debited from your bank account on a date you choose and invested in the scheme of your choice.
SIP is not a separate product; it is simply a disciplined method of investing in a mutual fund. You can start a SIP in equity, debt, hybrid, index or ELSS funds.
How does a SIP work?
Every time your SIP instalment is invested, you are allotted units of the scheme at that day’s Net Asset Value (NAV). When markets are down and the NAV is low, your fixed amount buys more units. When markets are up and the NAV is high, it buys fewer units. Over time this evens out your average purchase cost — a concept known as rupee cost averaging.
Rupee cost averaging: a simple example
Suppose you invest ₹5,000 every month for three months and the NAV changes each month:
| Month | Investment | NAV (₹) | Units allotted |
|---|---|---|---|
| Month 1 | ₹5,000 | 50.00 | 100.00 |
| Month 2 | ₹5,000 | 40.00 | 125.00 |
| Month 3 | ₹5,000 | 62.50 | 80.00 |
| Total | ₹15,000 | Average NAV: 50.83 | 305.00 |
Your average cost per unit is ₹15,000 ÷ 305 = ₹49.18, which is lower than the average NAV of ₹50.83 over the same period. This example is purely illustrative — rupee cost averaging does not guarantee a profit or protect against losses in a falling market.
Benefits of investing through SIP
- Start small: many schemes allow SIPs from ₹500 a month, and some from ₹100.
- Builds discipline: investing happens automatically, so you pay yourself first every month.
- No need to time the market: regular investing spreads your purchases across market ups and downs.
- Power of compounding: staying invested for the long term lets your returns earn further returns.
- Flexible: you can increase, pause or stop your SIP as your situation changes.
- Goal-based: you can link separate SIPs to separate goals — a home, your child’s education or retirement.
Types of SIP
- Regular SIP: a fixed amount at a fixed frequency.
- Step-up (top-up) SIP: the SIP amount increases automatically every year by a fixed amount or percentage, in line with your income.
- Flexible SIP: lets you change the instalment amount based on your cash flow (offered by some AMCs).
- Perpetual SIP: a SIP with no end date that continues until you stop it.
How to start a SIP in 4 steps
- Complete your KYC — a one-time process using your PAN and Aadhaar. See our mutual fund KYC guide.
- Choose a scheme that matches your goal, time horizon and risk appetite. Our guide on types of mutual funds can help.
- Decide the amount and SIP date — pick a date shortly after your salary is credited.
- Register the auto-debit mandate (NACH or UPI AutoPay) so instalments are deducted automatically.
Things to keep in mind
- Each SIP instalment is treated as a separate investment, so exit load and taxation are calculated for each instalment from its own date of investment.
- In ELSS funds, every SIP instalment has its own 3-year lock-in period.
- Missing a few instalments does not usually attract a penalty from the AMC, but several consecutive failed debits may lead to the SIP being cancelled and your bank may charge a bounce fee.
- Review your SIPs at least once a year to make sure they are still aligned with your goals.
Frequently asked questions
Can I have more than one SIP?
Yes. You can run multiple SIPs in the same or different schemes, each linked to a different goal.
Is SIP better than lump sum?
Neither is always better — it depends on your cash flow and market view. Read SIP vs Lump Sum for a detailed comparison.
Ready to start your SIP? Download the Profinity app or contact our team in Kanpur — we will help you complete KYC and choose schemes that suit your goals. Have more questions? Visit our FAQ page.
Disclaimer: Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not indicative of future returns. This article is for general information and investor education only and does not constitute investment, tax or legal advice. Profinity Mutual Fund Distribution Pvt. Ltd. is an AMFI-registered mutual fund distributor (ARN-76921).