What is Systematic Investment Plan?

Dreaming of that first home of your own, savings for your kid's college fund, or even a comfortable retirement? Are you worried about the stock market? Well, don't. 

Learning about SIP in mutual funds can be a total game-changer. A systematic investment plan (SIP) is one of the simplest ways to begin investing. It breaks the often overwhelming task into small, manageable steps.

This guide is tailored especially for SIP beginners. We will break down the SIP investment definition for beginners, plus help you visualise your potential growth. Ultimately, you will have a clear blueprint for initiating your investment journey with confidence.

What is a Systematic Investment Plan?

Think of a SIP like a subscription plan for building wealth. Or, think of an electronic piggy bank that automatically invests your money for you every month. It is a simple concept that turns investing into a monthly habit, like paying a bill.

Technically, an SIP refers to an investment of a predetermined amount of money at predetermined intervals, either monthly or quarterly, in a specific mutual fund scheme. Rather than investing in a massive chunk at a time, you make investments in smaller amounts at regular intervals of time. 

It's a straightforward plan with several solid positive aspects that make it a good proposition for both new and experienced investors.

Brief Overview of SIPs

Systematic Investment Plans (SIPs) were introduced in India in 1993 by Kothari Pioneer Mutual Fund, which later merged with Franklin Templeton. This marked the beginning of SIPs as a retail investment option in the Indian mutual fund industry.

Today, SIPs are one of the most preferred investment modes for retail investors in India, with monthly inflows crossing ₹27,000 crore as of June 2025.

The Key Benefits of SIPs: Why It's a Smart Choice

Although SIPs are traditionally associated with mutual funds, platforms like INDmoney offer SIPs in US stocks and Indian (IN) stocks. The same concepts of SIPs that is, discipline, rupee cost averaging, compounding, and flexibility, are equally helpful in the context of stocks. Here's why:

1. Instils Financial Discipline

Just as with mutual funds, creating an SIP in Indian or US stocks enables the investment of a fixed amount at a fixed interval (e.g., monthly) without the need to place individual trades manually. Automation ensures consistency, helping you gradually build a portfolio of stocks, whether it’s Indian companies like Reliance or US companies like Apple.

2. The Power of Rupee Cost Averaging

Stocks are very volatile. By investing a fixed amount every month, you get more units when prices are low and fewer when prices are high. This averages your purchase cost over time and reduces the risk of investing a large amount at a high price.

Say, if you invest ₹5,000 per month in US stocks, you will purchase additional units when the market dips, optimising your long-term returns.

It works automatically to average your purchase price in the long term, thus lowering the risk associated with market fluctuations.

Let's look at a simple example:

See how you bought more units when the price was lower? This reduced the average cost per unit.

3. Harnesses the Power of Compounding

Compounding has been called the eighth wonder of the world, and for good reason. Returns from your stock investments, in the form of capital appreciation as well as dividends (where received), can compound in the long term if reinvested. Investing periodically through an SIP, you get the benefit of the compounding factor, increasing your wealth exponentially.

4. Offers Flexibility and Accessibility

Most SIPs can be invested in by paying as little as ₹500 or even ₹100 per month, making investing accessible to all.

You may choose to step up, downsize, or even suspend your payments if your financial situation changes. And they are available in all types of mutual funds: equity, debt, and hybrid, so get one that fits your specific goals and risk tolerance.

SIP vs. Lump Sum Investing: Which One’s Right for You?

Exploring Different Types of SIPs

To better align with your financial journey, you can choose from several types of SIPs. Each offers a unique advantage to help you reach your goal faster.

1. Top-Up (or Step-Up) SIP

This feature automatically increases your SIP amount at set intervals (e.g., annually). As your income grows, your investment contribution grows with it, significantly accelerating your wealth creation over the long term. It’s a smart way to grow your investments without straining your budget.

2. Flexible SIP (Flexi SIP)

A Flex SIP allows you to adjust your monthly investment amount. You can invest more when you have surplus cash or see a market opportunity, and contribute less during months when finances are tight. This is ideal for those with variable incomes or investors who want more hands-on control.

3. Perpetual SIP

This is a SIP without a specified end date. It continues indefinitely until you decide to stop it, making it perfect for long-term goals like retirement. This approach ensures you remain disciplined until your financial objective is met, while still giving you the freedom to pause or cancel at any time.

Visualise Your Growth with a SIP Returns Calculator

Wish to know what your monthly investments add up to in the long term? This is where a SIP return calculator can help.
Estimate your investments' prospective value by entering three crucial inputs: your monthly investment, the number of years that your investment will run, and the yearly expected return that your investment will generate.

Let’s understand how compounding works.
For instance, if ₹5,000 per month in a well-diversified portfolio of IN or US stocks with the potential of a 10-12% return every year is invested, the same can exponentially increase in 15-20 years. Your total investment would be ₹12 lakhs. But thanks to compounding, the rough return on your investment can be roughly ₹46 lakhs!

Use INDmoney’s SIP calculator to estimate how your monthly investments can grow over time.

Your Journey to Financial Freedom Starts Now

As we've covered, an SIP is a disciplined, accessible, and powerful tool for building long-term wealth. By using rupee cost averaging and the magic of compounding, it takes the guesswork out of investing and helps you navigate market volatility with confidence.

It's the perfect starting point for anyone looking to achieve their financial goals systematically. Whether you're saving for a car, a house, or your retirement, a SIP can help you get there one small step at a time.

Common Questions for SIP for Beginners (FAQ)

Question 1: What if I miss a SIP payment?

If you miss an instalment, the AMC will simply not allot you any units for that month. There's generally no penalty. However, if you miss several consecutive payments (typically three), your SIP might be cancelled by the fund house.

Question 2: Can I stop my SIP or withdraw money anytime?

Yes, you can pause or stop your SIP at any time without a penalty, and for most open-ended funds, you can also withdraw your money whenever you need it. That said, it's important to be aware of two things: some funds (like tax-saving ELSS funds) have a mandatory lock-in period of 3 years, while others may charge an 'exit load' (a small fee) if you withdraw within a short period, typically one year.

Question 3: Can I increase my SIP amount later?

Yes, as your income grows, you can increase your investment amount. You can either start a new SIP in the same fund with the additional amount or use a 'SIP Top-up' feature. This feature lets you automatically increase your SIP amount by a fixed sum at regular intervals (e.g., increase by ₹500 every year).

Disclaimer: The content is meant for education and general information purposes only.  Past performance is not indicative of future returns. This in no way is to be construed as financial advice or a recommendation to invest in any specific stock or financial instrument. The Company strongly encourages its users/viewers to conduct their own research, and consult with a registered financial advisor before making any investment decisions.  Mutual Funds are non-exchange traded products, and INDstocks is merely acting as a mutual fund distributor. All disputes with respect to distribution activity, would not have access to the exchange investor redressal forum or arbitration mechanism. Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing. INDstocks Private Limited (formerly known as INDmoney Private Limited) 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), AMFI Registration No: ARN-254564, SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500, Research Analyst Registration No. INH000018948 BSE RA Enlistment No. 6428.