Investing Basics

SIP Explained for Indian Beginners (2025)

📅 December 19, 2025 ⏱ 10 min read

SIP is one of the most-used investing terms in India. But most explanations are confusing or too salesy. This guide breaks down SIP in the simplest way possible - no jargon, no hype.

What is SIP?

SIP = Systematic Investment Plan

It's a method of investing a fixed amount in mutual funds every month automatically.

Instead of investing ₹1 lakh once, you invest ₹10,000 every month for 10 months.

Think of it like this: SIP is like a gym membership for your money. You commit to showing up regularly, and over time, you see results. Except unlike gym memberships, people actually stick with SIPs.

It's not a product. It's just a way to invest regularly.

Weird fact: More Indians start SIPs in January than any other month. New year, new financial goals. Most of them survive past February. (Unlike gym memberships.)

How SIP Works

The Process

  1. You choose a mutual fund (equity, debt, hybrid, or index fund)
  2. You decide how much to invest monthly (₹500, ₹1,000, ₹5,000, etc.)
  3. You pick a date (e.g., 5th or 10th of every month)
  4. The amount gets auto-debited from your bank account every month
  5. Your money buys mutual fund units at that day's NAV (Net Asset Value)

Pro tip: Pick a SIP date that's 3-5 days after your salary. Why? Because investing ₹5,000 on the 28th when you have ₹347 left in your account doesn't work. Ask us how we know.

Rupee Cost Averaging

Because you invest every month, you buy:

Over time, this averages out your purchase cost.

Example:

Your average cost per unit = ₹98.36 (better than buying at ₹100 or ₹120)

This is rupee cost averaging. You automatically buy more when prices are low.

Reality check: This only works if you keep investing when markets crash. Most people do the opposite—they panic and stop. Don't be most people.

Why SIPs Are Popular in India

1. Discipline

Most people can't save or invest consistently. SIP forces discipline.

Once you set it up, money gets invested automatically every month. You don't need willpower.

Reality: The biggest investment mistake is not starting. SIP removes that barrier.

Funny fact: Studies show people are more likely to cancel Netflix (₹649/month) than cancel their SIP (₹1,000/month). Priorities sorted.

2. Affordability

You don't need ₹1 lakh to start investing.

Start with ₹500/month. Gradually increase as your salary grows.

Example:

Small amounts compound into large wealth over 15-20 years.

Mind-blowing math: ₹5,000/month invested for 20 years at 12% returns = ₹49.95 lakh. Total invested = ₹12 lakh. That's ₹37.95 lakh in gains. Magic? No. Compounding.

3. Convenience

No need to:

Set it up once. Forget about it. It runs on autopilot.

True story: Someone set up a SIP in 2010, forgot the login password, and checked in 2023. Portfolio had grown 4x. Forgetting was the best investment strategy.

SIP vs Lump Sum Investment

Risk

Winner: SIP reduces timing risk

Timing

Winner: SIP removes timing pressure

Savage truth: People who wait for the "right time" to invest are still waiting 5 years later. The market doesn't send you a calendar invite.

Emotional Control

Winner: SIP is psychologically easier

Returns

Reality: Most people can't time markets. SIP works better for 95% of investors.

Awkward fact: The same people who confidently say "I'll invest when market crashes" are the ones who panic and don't invest when it actually crashes.

Who Should Use SIPs?

1. Beginners

If you're new to investing, SIP is the safest entry point.

You don't need to understand market cycles or valuations. Just start and stay invested.

2. Long-Term Investors

SIPs work best when you invest for 10+ years.

Short-term SIPs (1-2 years) don't give the full benefit of compounding and rupee cost averaging.

Honest warning: If you're investing for 1 year because "I need money for wedding in 2026," SIP in equity funds is not for you. Go with FDs or debt funds.

3. Salaried People

If you get monthly salary, SIP matches your cash flow perfectly.

Example:

Relatable truth: If you don't invest before spending, there will be nothing left to invest. That's not financial advice. That's human psychology.

4. People Who Can't Time Markets

If you don't know when to enter or exit the market, SIP removes that decision entirely.

You invest regularly regardless of market conditions.

Blunt fact: No one can time markets consistently. Not your uncle who "called the 2020 crash." Not financial experts on TV. Definitely not you. SIP accepts this reality.

Common SIP Myths

Myth 1: "SIP guarantees returns"

Wrong.

SIP is just a method. It doesn't guarantee anything.

If you invest in a bad fund or the market crashes and doesn't recover, you can still lose money.

SIP reduces risk, but doesn't eliminate it.

Comparison: SIP is like wearing a seatbelt. It improves your odds. Doesn't make you invincible.

Myth 2: "Stop SIP when market falls"

Wrong.

This defeats the entire purpose.

When markets fall, NAV drops. You get more units for the same investment. This is exactly when you should keep investing.

Example:

Stopping SIP during falls is the worst mistake.

Real talk: The people who stopped SIPs in March 2020 during COVID crash regret it the most. Those who continued made the highest returns.

Myth 3: "SIP works only in bull markets"

Wrong.

SIP works best when markets are volatile (going up and down).

In a straight bull market, lump sum would give better returns. But no one knows when that will happen.

SIP averages out market ups and downs. That's the whole point.

Ironic fact: People love SIPs during bull markets and hate them during crashes. The actual best time to love SIPs? During crashes.

How to Start a SIP (Step-by-Step)

Step 1: Choose a Fund

Pick based on your goal and risk appetite:

Beginner tip: Start with a Nifty 50 index fund. Simplest option.

Honest advice: Don't pick a fund because your friend's portfolio is up 30% this year. His fund might crash next year. Stick to boring index funds.

Step 2: Choose Amount

Start with what you can afford comfortably.

Don't overcommit. Better to invest ₹1,000 consistently than ₹5,000 for 3 months and then stop.

Rule of thumb: Invest 10-20% of your monthly income. If you're earning ₹50,000 per month, that's ₹5,000-₹10,000 in SIP.

Fun challenge: Skip two Swiggy orders per month. Redirect that ₹800 to SIP. Your future self will thank you more than your current taste buds.

Step 3: Choose Date

Pick a date 3-5 days after your salary credit.

Example:

This ensures money is available when SIP runs.

Pro tip: Don't pick dates like 28th or 31st. February will mess with you.

Step 4: Start and Stay Invested

  1. Open account on Groww, Kuvera, Coin (Zerodha), Paytm Money
  2. Select fund
  3. Enter SIP amount and date
  4. Complete KYC and bank mandate
  5. Done

Then forget about it for 10 years. Don't check daily.

Brutal honesty: Checking your SIP daily is like watering a plant every hour. You're not helping. You're just being annoying.

Mistakes to Avoid with SIPs

1. Starting and Stopping Frequently

People start SIP, stop after 6 months, restart after 1 year. This destroys compounding.

Rule: Once you start, don't stop unless there's a financial emergency.

Emergency = job loss, medical crisis.

Not emergency = new iPhone launch, Goa trip, friend's bachelor party.

2. Overthinking Returns

Don't check your SIP returns every month. Markets fluctuate.

Reality: Your first 3-4 years of SIP will feel slow. That's normal. Compounding accelerates later.

Math truth: In a 20-year SIP, 70% of your gains come in the last 5 years. Early years feel boring. That's the price of admission.

3. Chasing Top-Performing Funds

People see a fund giving 40% returns and shift their SIP there. Then that fund underperforms next year.

Rule: Pick a solid index fund or balanced fund. Stay invested. Don't chase performance.

Painful reality: The "best performing fund" of 2023 is probably not the best of 2024. Stop fund-hopping.

Bottom Line

What SIP really is: A method of investing fixed amounts monthly in mutual funds through auto-debit. Not a product. Not magic.

Why it works:

How beginners should approach it:

SIP won't make you rich in 2 years. But it's the most reliable way for average Indians to build long-term wealth.

Stop waiting for the "right time." Start a SIP today.

Final fun fact: If you started a ₹5,000 SIP in Nifty 50 in January 2015 and never stopped, you'd have over ₹11 lakh today (Dec 2024). You invested ₹6 lakh. That's ₹5 lakh profit just for showing up every month.

← Back to Blog