What is a Systematic Investment Plan (SIP)?
A SIP (Systematic Investment Plan) is a strategic way to invest in Mutual Funds. Instead of making a large one-time payment, you invest a fixed amount regularly (monthly, quarterly, or weekly). This disciplined approach helps in building a significant corpus over the long term by leveraging the power of compounding.
Mathematical Formula for SIP:
FV = P × ({[1 + i]^n – 1} / i) × (1 + i)
Why Choose SIP for Wealth Creation?
Rupee Cost Averaging
You buy more units when prices are low and fewer when prices are high, lowering your average cost per unit over time.
Power of Compounding
Earnings on your earnings. Small amounts invested early grow exponentially as time progresses.
Financial Discipline
Automates your savings habit, ensuring you invest before you spend on non-essential luxuries.
Low Initial Capital
Start your journey with as little as ₹100 or ₹500 per month, making wealth creation accessible to everyone.
Detailed Investor FAQs
Is SIP better than Lumpsum?
Both have merits. Lumpsum is better when the market is significantly undervalued. However, SIPs are generally preferred for most investors because they mitigate market timing risk and handle volatility through averaging.
Does the calculator include taxes?
No, this tool calculates gross returns. Gains are subject to Capital Gains Tax. Currently in India, Long-term Capital Gains (LTCG) over ₹1.25 Lakh are taxed at 12.5% for equity funds.
Can I increase my SIP amount?
Yes! This is known as a Step-up SIP. Increasing your investment annually in line with your salary hikes can help you reach your financial goals much faster.