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Systematic Investment Plans (SIPs) in India

In recent years, Systematic Investment Plans (SIPs) have become popular among investors. SIPs provide an effective and disciplined approach to investing in mutual funds, making it easier for individuals to achieve their long-term financial goals. Here we glance at SIPs, their definition, benefits to the process of starting and managing an SIP.

What is an SIP?

A Systematic Investment Plan (SIP) is an investment strategy that gives individuals the opportunity to invest a fixed amount of money at regular intervals in mutual funds. It follows the principle of rupee cost averaging, which means that investors buy more units when prices are low and fewer units when prices are high. SIPs offer a disciplined approach to investing and eliminate the need for timing the market.

SIP Calculator

An SIP calculator is a virtual tool that helps investors estimate the potential returns on their SIP investments over a specified time. The calculator uses a mathematical formula that generates an estimate of the accumulated corpus at the end of the investment period. This helps investors plan their SIP investments effectively.

How does the SIP Calculator work?

The SIP Calculator uses this formula: M = P × ({[1 + i]n – 1} / i) × (1 + i)
In this formula,

You are investing ₹1,000 per month for 12 months at a periodic rate of interest of 12%
The rate of return per month would be 12%/12 = 1/100=0.01
Hence, in one year, you will receive approximately ₹12,809

*However, do keep in mind that the rate of interest on Mutual Funds change as per market conditions. It may increase or decrease, which may impact the estimated returns.

While an SIP calculator provides valuable insights, it is important to note its limitations. The main drawback is that a calculator presumes a consistent rate of return, which may not reflect the actual market conditions. Market fluctuations can impact the returns significantly. 

All things considered, an SIP calculator generally provides investors with accurate projections. You can try the SIP Calculator on Upstox, here and then make informed decisions about an optimal investment plan. 

Types of SIPs

There are several SIPs available to Indian investors. Here you have a list of SIPs, their main features, suitability, benefits and risks.


Main Feature


Risk and Benefit

Equity SIP

Invests primarily in equity or stocks of companies.Has the potential for higher returns but is also subject to market volatility.

For investors with:

  • A higher risk appetite
  • A long-term investment horizon (typically five years or more)
  • A goal for wealth creation

Offers the potential for capital appreciation and higher returns over the long term.Also, exposed to market risks and may experience short-term fluctuations.

Debt SIP

Invests in fixed income instruments such as government securities, corporate bonds and money market instruments.Aims for a stable income and lower volatility.

For conservative investors seeking:

  • A regular income
  • Capital preservation
  • Lower risk
  • A shorter investment horizon

Provides stable returns.Acts as a hedge against market volatility.May offer relatively lower returns compared to equity SIPs.

Hybrid SIP

Invests in a combination of equity and debt instruments.

For investors seeking:

  • Moderate risk exposure
  • A regular income
  • A medium to long-term investment horizon.

Offers diversification benefits.Has the potential capital for appreciation, and income generation.Has associated risks in the equity component’s market fluctuations.

ELSS (Equity-Linked Saving Scheme)

Are tax-saving SIPs that invest mostly in equities.Offer tax benefits under Section 80C of the Income Tax Act.

For investors looking to:

  • Save taxes while aiming for long-term wealth creation
  • Have a medium to long-term time horizon for their investment goals

Provides tax benefits.Has the potential for higher returns and the advantage of compounding.Also subject to market risks and short-term fluctuations.

Sectoral SIP

Focuses on specific sectors such as banking, technology, healthcare, and more.

For investors with:

  • A high-risk appetite
  • Specific sectoral insights
  • A long-term investment horizon

Offers an opportunity to capitalise on the growth of specific sectors.Also exposed to concentrated risks associated with the chosen sector.

Index SIP

Replicates a specific market index such as Nifty 50 or the Sensex.Aims to deliver returns like the index they track.

For investors seeking:

  • Market returns and broad market exposure.
  • Lower costs
  • No requirements for active fund management.

Provides diversification.Has lower expense ratios.Benchmark-like returns.Also subject to market risks and cannot outperform the index they track.

Gold SIP

Invests in gold ETFs (Exchange Traded Funds) or gold mutual funds, giving investors the opportunity to accumulate gold over time.

For investors looking to:

  • Diversify their portfolio.
  • Hedge against inflation.
  • Invest in gold as an asset class.

Offers a convenient and cost-effective way to invest in gold.Provides liquidity and eliminates the need for physical storage.Impacted by the fact that gold prices can be volatile in the short term.

International SIP

Invest in foreign securities, giving investors the opportunity to participate in global markets and economies.

For investors seeking:

  • International diversification and exposure to global trends.
  • Long-term growth opportunities.

Provides access to international markets, sectors, and currencies.

Potential for higher returns but is also exposed to currency risk and global market volatility.

Understanding the different types of SIPs available in India is crucial for investors to align their investment choices with their financial goals, risk appetite and investment horizon. It is essential to evaluate the characteristics, suitability, benefits and risks associated with each type of SIP before making any investment decisions.

7 Benefits of an SIP

SIPs offer a disciplined and convenient way to invest in mutual funds, giving individuals the opportunity to achieve their financial goals in a systematic way. Here are more benefits of SIPs and why they are a preferred investment avenue for countless investors.

Disciplined and regular investing:

A key benefit of an SIP is its feature that encourages disciplined investing. With SIPs, investors commit to investing a fixed amount regularly, typically monthly. This systematic approach helps individuals develop a saving and investing habit, ensuring they consistently set aside a predetermined amount from their income. Regular investments through SIPs eliminate the need for timing the market, as investors benefit from rupee cost averaging.

Rupee Cost Averaging:

SIPs utilise the strategy of rupee cost averaging so, the impact of market volatility is mitigated. When the market is experiencing a downturn, the fixed investment amount buys more units, and when the market is performing well, it buys fewer units. Over time, this approach helps smoothen the investment journey by reducing the impact of short-term market fluctuations.

Flexibility and convenience:

SIPs have flexibility in terms of investment amounts and time periods. Investors can choose the investment amount that best suits their financial capacity. Investors also have the option to modify their invest amounts per any changes to their financial situations. Most mutual fund houses in India give investors the choice to start SIPs with relatively small amounts. This feature makes SIPs accessible to a wide range of individuals. Thus SIPs have the flexibility which lets investors align their investments with their financial goals.

Power of compounding:

Applying the power of compounding, SIPs help investors grow their wealth over the long term. By consistently investing in mutual funds through SIPs, individuals help their investment returns generate additional earnings. This compounding effect can significantly enhance the overall returns on investment and accelerate wealth creation. Starting early and staying invested for a more extended period lets compounding work its magic. The initial investment is manifold multiplied.

Diversification and professional management:

Investors access a diversified portfolio managed by experienced professionals. Mutual funds pool money from multiple investors and invest in a wide range of asset classes such as equity, debt and hybrid instruments. This diversification reduces the risk associated with investing in individual stocks or assets. Professional fund managers conduct research, analyse market trends, and make informed investment decisions, helping investors benefit from their added expertise.

Goal-Based investing:

SIPs can align with specific financial goals, such as buying a house, funding an education, retirement planning and more. By setting up separate SIPs for different goals, investors can invest systematically towards each objective. SIPs provide a structured approach to investing, ensuring that investors stay focused on their financial goals and accumulate a corpus over a stated time horizon.

Liquidity and withdrawal flexibility:

Investing via SIPs does not lock up an investor’s funds for long. Mutual funds offer high liquidity, giving investors a choice to redeem their investments partially or in full, per their requirements. While it is advisable to stay invested for the long term, to reap the benefits of compounding. But SIPs provide a flexibility to withdraw funds whenever there is a financial contingency.

SIPs have emerged as a powerful investment tool for Indian investors. SIPs have a host of benefits and are a convenient and efficient way to grow their wealth over time.

How to start an SIP?

If you are considering starting an SIP, here’s a little bit about the process.

After you define your financial goals, try to determine the purpose of your investment. As to whether it is for long-term wealth creation, retirement planning, educational expenses, or any other goal. If you have clarity about your objectives, this will help select the right mutual funds for your SIP. Understanding your risk appetite is also elemental in determining the right asset allocation for your SIP. Consider factors such as your age, income, financial commitments, and investment experience, to assess your risk appetite. Based on your personalised risk profile, you can then choose an appropriate asset allocation between equity, debt, and hybrid funds, to align with your investments.

After your thorough and independent research on available mutual funds, identify those that suit your investment objectives.

Now you’re ready to choose the right investment platform. Open a Demat Account with Upstox. You can begin trading and start your SIP in mutual funds. The Upstox platform is a user-friendly interface with robust security measures. You’ll gain access to a wide range of mutual funds to suit your investment preferences. Starting an SIP is a straightforward process. Begin your SIP journey confidently. Also Remember to review and rebalance your investments periodically to stay on track to achieve your financial goals.

A comparative analysis between lump-sum investments and Systematic Investment Plans (SIPs)

Individuals have the option to invest through Systematic Investment Plans (SIPs) or make lump-sum investments. Both approaches have their own merits and considerations.

What are lump-sum investments?

A lump-sum investment is about investing a certain (sometimes significant) amount of money in a single transaction. Investors who opt for lump-sum investments may want to utilise an immediate market opportunity. These investors may also have a pre-existing amount of funds immediately available for investment purposes. A lump-sum investment It implies that substantial capital is deployed at one go.

What are Systematic Investment Plans (SIPs)?

A Systematic Investment Plan (SIP) is a disciplined approach to investing. It involves investing a fixed amount at regular intervals, such as monthly or quarterly. Investors can choose their preferred monetary amount for investment. After investors decide on that figure, the money is automatically deducted from their bank account and invested in their selected mutual fund scheme. SIPs encourage regular savings and benefit from rupee-cost averaging. In this comparative analysis, we explore SIPs and lump sum investments with their key characteristics.




Risk Mitigation

  1. Offers an advantage through rupee-cost averaging.
  2. By investing a fixed amount at regular intervals, investors buy more units when prices are low and fewer units when prices are high.
  3. This strategy can help average out the impact of market volatility.
  4. Further reduces the risk associated with timing the market.
  1. The investor may take on a higher level of risk.
  2. The investment is subject to market volatility.
  3. The timing of the investment is crucial.
  4. If the investment is made during a market peak, it can lead to potential losses if the market subsequently declines.

Investment Discipline

  1. Encourages discipline in investors by requiring regular savings and investments.
  2. As a fixed amount is invested at regular intervals, investors develop a wholesome saving pattern.
  3. Benefits from the power of compounding over the long term.
  4. Encourages a systematic approach to investing.
  1. While it offers the potential for higher returns if invested well, a lump-sum does not require a disciplined savings pattern.
  2. Furthermore, it may also be quite challenging for investors to keep accumulating substantial investment amounts consistently.

Market Timing

  1. Eliminates the need for timing the market effectively.
  2. By investing a fixed amount regularly, investors can benefit from both market highs and lows.
  3. Lets investors avoid the added step of making investment decisions based on short-term market movements, instead giving room for a more long-term approach.
  1. The timing of the investment is crucial.
  2. Investors need to analyse market trends and then make a decision on when to deploy their capital.


  1. Offers a built-in diversification benefit through mutual fund investing.
  2. Provides exposure to a broader market.
  1. Provide an opportunity to diversify across different asset classes and investment instruments.
  2. Investors can allocate their capital per their risk appetite and investment goals.
  3. However, diversification in lump-sum investments can require considerable expertise in order to build a well-rounded portfolio.

Flexibility and Liquidity

  1. Provides a long-term investment approach, but in the process also making them less flexible. compared to lump-sum investments.
  2. While investors can pause or stop their SIPs at any time, it is recommended to maintain consistency to gain maximum benefits.
  3. There is also some measure of liquidity, as investors can redeem their units partially or completely, depending on the terms and conditions of the fund scheme.
  1. Offers greater flexibility and liquidity.
  2. Investors have the choice to withdraw their entire investment or a portion of it, whenever they require.

Choosing between a lump-sum investment or an SIP is underlined by different factors. It is advisable to consult with a financial advisor to evaluate your specific financial situation and goals to determine the most suitable investment strategy tailored for you.

Tax implications for an SIP

While SIPs offer a good measure of potential returns, it is also elemental to understand their tax implications. The tax treatment of an SIP investment depends on the type of mutual fund in which it is invested. 

It is essential to maintain proper documentation of SIP investments, including investment statements, dividend statements, and capital gains statements. These records will help in an accurate reporting of income and gains during the income tax filing process. Tax laws are subject to change. It is advisable to consult a tax advisor or financial planner for personalised guidance based on your tax bracket and investment portfolio. Understanding the tax implications of SIP investments helps towards effective tax planning and maximising returns.

Five common mistakes to avoid while making a Systematic Investment Plan

While SIPs offer many benefits, it is essential to be aware of the potential misconceptions that may interfere with your investment journey. Here’s five common mistakes to avoid while investing in an SIP in India. 

  1. Neglecting financial goal planning: Without clear goals, it is challenging to determine the appropriate investment amount, tenure, and asset allocation for your SIP.
  2. Investing without research: Investing without conducting thorough and independent research can lead to poor investment decisions. A lack of research can result in unsuitable investing.
  3. Timing the market: SIPs are designed to reduce the impact of market volatility through rupee cost averaging. Attempting to time the market based on short term fluctuations is tricky. Staying focused on the long-term may be worthwhile.
  4. Unmonitored investments: An SIP does not equate to setting an investment amount and then forgetting about it. Periodic reviews of your investment will save the investment from going unmonitored and will further optimise your SIP.
  5. Ignoring professional guidance: It is essential to seek professional guidance for your SIP. Financial advisors provide valuable insights and help align your investments with your goals. Their expertise can maximise your returns.

By avoiding these common mistakes, investors can enhance their SIP experience. It is advised that you be patient and focus on the long term. This will help you make the most of your SIP. Remember, investing in mutual funds involves market risks. It is essential to conduct independent and thorough research. Also seek professional advice before making any investment decisions. 

This calculator is meant to be used for indicative purposes only. It is designed to assist you in determining the appropriate amount of prospective investments. This calculator alone is not sufficient and shouldn’t be used for the development or implementation of any investment strategy. Upstox does not take the responsibility/liability nor does it undertake the authenticity of the figures calculated therein. Upstox makes no warranty about the accuracy of the calculators/reckoners. The examples do not claim to represent the performance of any security or investments. In view of the individual nature of tax consequences, each investor is advised to consult his/her own professional tax advisor before making any investment decisions on the basis of the results provided through the use of this calculator.