SIP – Systematic Investment Plan

A systematic investment plan (SIP) is a process of investment, wherein the investors can make a systematic periodic investment in market-linked securities for a specific tenure. The investments can be made in small amount instead of lump-sum.

The investment can be made in the frequency of weekly, monthly, or quarterly. SIP helps to grow money through compounding interest, ensuring higher returns on maturity.

What Is SIP – Systematic Investment Plan?

Systematic Investment Plan is commonly known as an SIP. In India, SIP plans allow you to invest a fixed amount in your favorite mutual fund schemes periodically to grow your SIP premium through compounding interest.

So here’s what is SIP in a nutshell: It is a smart, or rather hassle-free, mode of investing money in mutual funds, where you are allowed to contribute a pre-determined sum of money on a weekly, monthly, or quarterly basis.

SIP mutual funds are flexible in nature, thus, investors can choose to decrease or increase the amount of investment, or stop investing in the plan whenever they want. SIP is the safest and best choice of investment for beginners and for those who are not well-versed in the mechanism of the financial market.

Top SIP Mutual Funds in India

Here are best mutual fund schemes to invest through SIP in India

SIP Plans Type 3 Year 5 Year
Aditya Birla Sun Life Medium Term Plan Debt Fund 8.39% 9.13%
Aditya Birla Sun Life Savings Fund Debt Fund 7.53% 8.03%
Aditya Birla Sun Life Short Term Fund Debt Fund 7.83% 8.37%
Axis Blue Chip Fund Equity Fund 7.53% 5.92%
Axis Focused 25 Fund Equity Fund -9.74% 7.66%
Birla SL Balanced ’95 Fund Balanced Fund 9.42% 16.83%
Birla SL Equity Fund Equity Fund 13.70% 21.78%
DSP BlackRock Midcap Fund Equity Fund 16.77% 25.68%
DSP Equity Fund Equity Fund -9.97% 3.25%
DSP Strategic Bond Fund Debt Fund 7.70% 8.10%
Edelweiss Large &Mid-cap Fund Equity Fund 1.70% 2.90%
HDFC Balanced Balanced Fund 10.65% 18.96%
HDFC Mid Cap Opportunities Fund Equity Fund 14.84% 26.00%
HDFC Prudence Fund(G) Balanced Fund 9.02% 16.56%
HDFC Small Cap Fund Equity Fund 21.52% 24.31%
ICICI Prudential Balanced Advantage Fund Balanced Fund 9.16% 14.39%
ICICI Prudential Equity & Debt Fund Equity Fund 11.11% 17.48%
ICICI Prudential Value Discovery Equity Fund 7.34% 21.25%
Kotak Standard Multicap Fund Equity Fund -1.28% 3.56%
L&T India Prudence Fund Balanced Fund 10.03% 18.36%
L&T low Duration Fund Debt Fund 6.12% 7.49%
Mirae Emerging Bluechip Fun Equity Fund 1.80% 8.10%
Motilal Oswal Focused 25 Fund Equity Fund -8.25% 3.69%
Nippon India Low Duration Fund Debt Fund 7.50% 7.73
Reliance Credit Risk Fund Debt Fund 7.87% 8.33%
Reliance Liquid-Treasury Plan(G) Debt Fund 6.82% 7.32%
SBI Bluechip Fund Equity Fund -3.94% 0.95%
SBI Magnum Balanced Fund Balanced Fund 9.10% 17.27%
SBI Magnum Gilt Short Term Debt Fund 8.78% 9.38%
SBI Small Cap Fund Equity Fund 1.80% 8.40%
TATA Large &Mid-cap Fund Equity Fund -2.45% 1.00%

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SIP Plans
5 Years

SIP Plans

7 Years

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12 Years

SIP Plans

15 Years

SIP Plans

20 Years

SIP Plans

The route of SIP mutual fund allows you to efficiently manage your personal finances and build a financial corpus targeted at a safe financial future. Contributing to SIP ensures that you can manage your everyday finances, and that too without any hassle. However, the returns are totally subject to your fund choice. The above list of the best SIP plans in India to help you choose your ideal SIP investment.

How Does SIP work?

Investing in SIP mutual fund is very simple and hassle-free. When you apply for one or more best SIP plans, your money is automatically debited from your bank account on a stipulated interval and invested in mutual funds you have purchased. Based on the NAV (Net Asset Value) of your funds, you are allocated a certain number of units at the end of the day. Every time you invest, you choose to invest in best SIP plan in India, and additional units are added to your account based on the current market rate.

The investors don’t require being an expert in the market timing to invest in the Stock Market. Units are purchased at different rates. When the prices are high, the investors buy more units, but when the prices are low, investors buy fewer units.

Two methods that greatly benefit the investors under even best SIP plans are – Rupee Cost Averaging and Power of Compounding.

Rupee-Cost Averaging

The Stock markets in India are unpredictable. Hence, it is often difficult to understand what the best time to invest in is and what is not. Rupee-cost averaging helps investors get rid of this problem. It allows your invested money to earn less units when the price is high and more units when the price is low.

Let’s understand rupee-cost averaging with an example. Let’s assume you are investing Rs.500 each month between November 6, 2018 and October 5, 2019.

Now, check out the average cost per unit for investment. You’ll notice that it is lower than the average NAV of your investment over a period of 1 year.

Types of SIP

Systematic Investment Plans (SIP) are of 4 types and a short description of each of these is given below:

  • Top-up SIP: This SIP type allows you to increase your investment amount periodically. This also means that you can make the most of your SIP mutual fund investment by contributing to well-performing mutual fund schemes at certain intervals. You can increase your investment amount when your income increases.

  • Flexible SIP: This SIP type allows you to increase as well as decrease your investment amount as per the cash flow you have. This way you can skip one or more payments when you face cash crunch due to any reason. Likewise, you can make a bigger contribution to your SIP account when you receive a bonus or an additional income.

  • Perpetual SIP: SIP investments are, generally, for a fixed period of 1 year, 3 years, or 5 years. A SIP mutual fund is referred to as Perpetual SIP if you do not mention the end date in the mandate date. This SIP types allows you to redeem your funds whenever required or, particularly, when you have achieved your financial goals. However, it is advisable to set an end date for your SIP contribution so as to build a disciplined, goal-based investment.

  • Trigger SIP: This SIP type is ideal for investors with limited knowledge of the financial market. You are allowed to set NAV, index level, SIP start date or event, etc. Since this SIP mutual fund type encourages speculation, it is not desirable or much recommended.

  • enefits of Investing in SIP

    SIP investment offers various benefits to investors. With a systematic investment plan, an individual can reap big returns by investing a small amount regularly. The following are the benefits of investing in SIP.

    • Convenience: By using SIP, one can invest in a disciplined and phased manner. As one of the most convenient and hassle-free modes of investment, the investors can start making the investment through SIP with a minimum amount of Rs.500. Moreover, the investors can also authorize a mandate from the bank to automatically pay for the SIP investment every month.

    • Rupee Cost Averaging: The investors do not need to time the market, as they can buy more units when the markets are performing low and can buy fewer units when the market is performing high. This reduces the overall investment cost.

    • Power of Compounding: One of the best ways to accumulate wealth is to invest regularly. A small amount invested on a regular basis can ultimately double over a long-term period.  The benefit of compound interest ensures profitable long-term returns as compared to the one-time investment.

    • 2x Higher Returns than RD: SIP Investment Plan offers double higher returns as compared to the conventional Fixed Deposits (FDs) and Recurring Deposits (RDs). SIP Plan helps to beat inflation in a much efficient manner. SIP mutual funds help to deal with the market fluctuation and provide returns irrespective of the market performance of the funds.