What is a Systematic Investment Plan (SIP)?

A Systematic Investment Plan (SIP) is a method of investing a fixed amount of money in mutual funds at regular intervals (usually monthly). It promotes disciplined investing and helps manage market volatility through a concept called rupee cost averaging.

How is SIP different from a lump sum investment?

In a lump sum investment, you invest a large amount of money all at once. In a SIP, you invest smaller amounts periodically. SIPs are less risky because they average out the purchase cost over time, while a lump sum investment's success is heavily dependent on the market conditions at the single moment of investment.

SIP (Systematic Investment Plan) Calculator

Total Invested Amount

Wealth Gained

Expected Matured Value

The Parable of the Bamboo: Why SIP Works

There's an old story about the Chinese Bamboo Tree. After a farmer plants the seed, he must water and nurture the ground every single day. For the first year, nothing appears. For the second, third, and fourth years, still nothing. It's a test of pure faith and discipline.

The Power of a Strong Foundation

Then, in the fifth year, something miraculous happens. The bamboo tree breaks through the ground and grows an astonishing 90 feet in just six weeks. Did the tree grow 90 feet in six weeks? No. It grew for five years. For four years, all the growth was happening underground, building a massive and complex root system strong enough to support its eventual, explosive height.

A Systematic Investment Plan (SIP) works in the exact same way. In the early years, your investment growth might seem slow and unremarkable. You are patiently watering your investment with monthly contributions. During this time, you are building your financial "root system." The real, visible growth—the kind that creates significant wealth—happens later, when the power of compounding takes over and your earnings start generating their own substantial earnings. This calculator's chart shows you that invisible underground work turning into towering success.

Frequently Asked Questions

What is Rupee Cost Averaging and how does SIP help?

Rupee Cost Averaging is an automatic strategy where you buy more units of a mutual fund when prices are low and fewer units when prices are high. Since a SIP invests a fixed amount each month, this happens automatically. It helps smooth out the effects of market volatility over the long term.

Is SIP better than a one-time lump sum investment?

It depends on your risk tolerance and market conditions. A lump sum can generate higher returns if you invest right before a bull market. However, a SIP is generally considered less risky because it averages out your purchase price and removes the stress of trying to "time the market." For most investors, the disciplined approach of a SIP is more sustainable.

What is a realistic expected return rate to use?

This depends on the type of mutual fund. For equity funds, which invest in stocks, a long-term historical average might be 10-12% per year. For debt funds, which are safer, it might be 6-8%. It is always wise to be conservative in your planning. Past performance is not an indicator of future returns.