How SIP Works?

How SIP Works?

What is a SIP?

A Systematic Investment Plan (SIP) is a disciplined way to invest in mutual funds. Instead of investing a lump sum, you invest a fixed amount — say ₹1,000 or ₹5,000 — every month. This approach makes investing affordable, consistent, and stress-free.

Think of SIP like a recurring deposit — but instead of earning fixed interest, your money grows based on market performance through mutual funds.

How SIP Works

When you start a SIP, you authorize the mutual fund company to auto-debit a fixed amount from your bank account at regular intervals (usually monthly). That money is then used to buy units of your selected mutual fund at that day's Net Asset Value (NAV).

Example:

     
  • You start a ₹5,000 monthly SIP in an equity mutual fund
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  • Every month, you get different units based on that day’s NAV
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  • Over time, you accumulate units at both high and low NAVs

This process is called Rupee Cost Averaging, which helps reduce the average purchase cost over the long term — a key benefit of SIPs.

Benefits of SIP

     
  • Disciplined Saving: Automates your investing habit.
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  • Start Small: Even ₹500/month is enough to begin.
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  • Rupee Cost Averaging: Reduces the impact of market volatility.
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  • Compounding Growth: The longer you stay invested, the more your wealth compounds.
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  • Emotion-Free Investing: Avoids the stress of timing the market.

SIP vs. Lump Sum: What’s Better?

There’s no one-size-fits-all answer — it depends on your income, market condition, and investment goals.

     
  • SIP: Best if you have regular income and want to invest gradually
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  • Lump Sum: Useful if you have surplus funds and the market is reasonably valued

Tip: You can also combine both — start with a lump sum and continue with SIPs!

Real-World Growth: SIP in Nifty 50 Index Fund

If you had invested ₹5,000 per month for 10 years in a Nifty 50 Index Fund (Regular Plan), your total investment of ₹6 lakhs could have grown to over ₹11–12 lakhs*, assuming historical average returns of 11–12% CAGR.

*Past performance is not indicative of future returns.

Learn more: The Psychology of Long-Term Investing

Getting Started with SIP on Wealth North

     
  1. Complete your KYC and UCC on our platform
    2.  
  2. Choose a mutual fund that fits your goals
    3.  
  3. Set your SIP amount and date
    4.  
  4. Relax — we’ll auto-invest for you every month

Ready to build wealth? Try our SIP Calculator and see how your money can grow over time.

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