What is SIP in Mutual Funds with Examples?

What is SIP in Mutual Fund-Meaning-Examples-Features-characteristics-Advantages-Benefits-Disadvantages-Limitations-iBizMoney

When you use a SIP to put money into a mutual fund scheme, you will buy a set number of fund units. Since SIP investors make money when the market goes up and when it goes down, there’s no need to try to time the market. Let us view the what is SIP in mutual funds with examples in this section.

With a systematic investment plan (SIP), you can invest a set amount of money over a set amount of time. You can invest in a certain number of fund units based on the amount. If you do this for a long time, you’ll be able to put money into the fund when times are good and when times are bad. So, you can put money into the market at any time. When you try to time the market, you run the risk of putting your money into the market at the wrong time. With SIP investments, you don’t have to worry about the ups and downs of the market.

What is SIP in Mutual Funds?

A systematic investment plan, or SIP, is just a way to put a set amount of money into a mutual fund on a regular basis. With a SIP, you can set up a monthly investment of a certain amount into a mutual fund.

The goal of a Systematic Investment Plan, or SIP, is to slowly put money into mutual funds over time. The phrase “systematic investment plan” refers to the practise of investing set amounts of money at set times. Every month, every three months, every six months, and so on. Investing this way over and over again can help you get closer to your financial goals.

With a systematic investment plan (SIP), you can invest gradually instead of all at once. This means that you can use SIPs to start investing in mutual funds with very small amounts of money. Using a SIP as a way to invest will force you to save money every month. This will teach you to save money in the long run.

Example of SIP in Mutual Fund

With SIP, you can invest regularly in equity funds no matter which way the market is going. With a systematic investment plan (SIP), you can put a certain amount of money into equity funds every month, no matter how the stock market changes. When the market goes down, you can buy more units of an equity fund, and when it goes up, you can buy less.

You can cut down on the initial cost by buying units of an equity fund in installments. So, your portfolio will be less affected by short-term changes in the market. Consider the following example to understand what Rupee Cost Averaging means: So, you want to invest in the stock market and decide to employ a systematic investment plan to put Rs 1000 per month into an equity fund. Because the stock market is so volatile, the NAV of an equity fund is always changing. Since the NAV changes, you can’t invest at the same price every month.

This is an example of a SIP based on a Rs 10,000 monthly investment from January to June of a given year. As shown above, you bought 625 units of an equity fund over the course of six months at an average price of Rs 96 (576/6) per unit. With your initial investment of Rs 30,000, you could have bought 600 units at a higher NAV of Rs 100 in January. (Rs 60,000/100). So, you can now use the Rupee cost averaging method to figure out what the average cost per unit is.

Difference Between SIP vs Lump sum

A systematic investment plan and a lump sum are the two most common ways to invest SIP in mutual funds. A lump sum investment is a large amount of money put into a mutual fund all at once. Is it better to make payments over time instead of one big payment? The information below is meant to help you decide what to do.


All of the money is invested at once, which is what the term “lump sum” means. So, the best way to get the best returns is to invest at the right time. If the market does well, you can make a lot of money. But if the market drops for no reason, you could lose a lot of money. This could be a great plan for wealthy, smart investors. But if you are new to investing, it’s probably best to stick to SIP investments.

Overall Money

Most people agree that SIPs are the best way to invest a small amount of money. You can start investing through SIP in mutual funds with as little as Rs. 500 per month and as much as Rs.1,00,00,000 The first investment must be at least 500 Indian Rupees.

Investing with Discipline

People who use SIPs tend to have more stable finances in the long run. You can better manage your money and get closer to your long-term financial goals if you make regular investments of a set amount. Even though it may feel like you’re not making any progress, when you look back on your work, you’ll see how far you’ve come. With the SIP option, you can slowly save up a good amount of money over time.

Most people don’t have a lot of money to save every month, so lump-sum investments don’t work for this kind of disciplined investing. You can choose between systematic investment plans and one-time, large-sum investments based on your investment goals, level of comfort with risk, and level of knowledge (or “lump sums”). But most financial advisors will tell their clients to use SIPs instead of making a big investment all at once.

Best Returns and Performance

When the stock market is going up, it is smart to put a lot of money into mutual funds. If this happens, investors could expect to make a lot of money. Due to Rupee-Cost Averaging and the power of compounding, a SIP is the safest way to invest in the stock market.

In the event that the market goes down, the investor is likely to buy more units of the asset. When the market price of an asset goes up, investors tend to buy less of it. But when the average cost is taken into account, long-term returns are about the same.

Why should you Invest Money in SIP Mutual Funds?

SIP mutual funds are good investments because they are based on the idea of “Save First, Spend Later.” Instead of making a big investment all at once, a SIP lets you put money in over time. You can do this weekly, monthly, or quarterly. SIP mutual funds have many benefits, such as being able to use the “power of compounding,” “Rupee Cost Averaging,” “becoming a disciplined investor,” “serving as an emergency fund,” and many more.

Who Would Get the most out of Putting Money in a SIP?

People who have never invested in a mutual fund before might want to start with a SIP. Those who have a steady source of money, like a salary, will gain a lot from this. Set up a SIP to put some of your regular income into mutual funds. In the long run, this teaches you to be responsible with your money because you have to set aside a set amount at set times.


SIP stands for “systematic investment plan.” It lets investors put a set amount of money into a mutual fund every month. During the investment period, you can expect to get payments on a regular basis. I hope this talk about SIP mutual funds, how they work, and their pros and cons has been helpful to you. SIP investments are popular with investors, especially those who get regular paychecks, because they can be funded reliably.

This is because each month’s paycheck can be used to put the SIP amount into the fund right away. On the other hand, there are a lot of other things you could do. The contribution can be made every three months, every month, every two months, or every week. I hope this talk about SIP in mutual funds, how they work, and their pros and cons has been helpful to you.

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