How Does a SIP Work?
A SIP (Systematic Investment Plan) allows you to invest a fixed amount at regular intervals in mutual funds. Thanks to rupee cost averaging and the power of compounding, SIPs are one of the most effective wealth-building tools in India.
Formula Used:
P × ((1 + r)^n − 1) × (1 + r) / r
where:
P = Monthly Investment, r = Monthly rate, n = Total months
Best Practices
- Stay invested long-term (8+ years)
- Increase SIP amount annually (SIP Step-Up)
- Always compare fund category returns