A SIP (Systematic Investment Plan) is a way to invest a fixed amount in a mutual fund automatically at a regular interval — usually monthly. To start one in India in 2026, you complete your KYC, pick a mutual fund, set the amount and date, and enable auto-debit from your bank account. You can begin with as little as ₹100–₹500 per month, and the whole setup takes about 20–30 minutes online.
This beginner's guide walks you through exactly what a SIP is, how it works, the step-by-step process to start, how much to invest, and the common mistakes that trip up new investors.
What Is a SIP?
A SIP is not an investment product — it is a method of investing in mutual funds. Instead of putting in one large lump sum, you contribute a fixed sum at set intervals. On your chosen date each month, the amount is auto-debited from your bank and used to buy units of the fund at that day's NAV (Net Asset Value).
Because mutual funds are market-linked, returns are not fixed or guaranteed. Over long horizons, equity mutual funds have historically delivered returns broadly in the range of around 10–12% per year, but any given year can be negative. SIPs are designed precisely to ride through that volatility.
The opposite approach is a one-time lump-sum investment. If you have a windfall to deploy at once, compare the two outcomes using a lumpsum calculator before deciding.
How Does a SIP Work?
Two simple but powerful ideas make SIPs effective:
- Rupee-cost averaging: Because you invest the same amount regularly, you automatically buy more units when prices are low and fewer when prices are high. Over time this averages out your purchase cost, so you don't have to guess the "right" time to invest.
- Compounding: Your returns themselves start earning returns. The longer you stay invested, the more pronounced this snowball effect becomes — which is why time in the market matters more than timing the market.
A quick illustration of how a modest monthly SIP can grow at an assumed ~12% annual return (figures are approximate and for illustration only — actual returns vary):
| Monthly SIP | Duration | You invest (approx.) | Estimated value (approx.) |
|---|---|---|---|
| ₹5,000 | 5 years | ₹3,00,000 | ₹4,12,000 |
| ₹5,000 | 10 years | ₹6,00,000 | ₹11,60,000 |
| ₹5,000 | 20 years | ₹12,00,000 | ₹49,90,000 |
Notice how the gap between what you put in and what you get out widens dramatically with time. Plug in your own numbers with our SIP calculator to see your personal projection.
How to Start a SIP in India: Step by Step
- Complete your KYC. Mutual fund investing requires a one-time KYC (Know Your Customer) verification. Keep your PAN, Aadhaar, a bank account, and a selfie/photo ready. Most platforms now offer fully digital eKYC that's approved within minutes to a couple of days.
- Choose where to invest. You can invest through a direct platform or the fund house's own website (these offer Direct plans with lower expense ratios), or through a distributor/bank/advisor (Regular plans). Direct plans cost less over time; Regular plans come with hand-holding.
- Define your goal and horizon. Are you investing for retirement (15+ years), a home down-payment (5–7 years), or a short-term goal (under 3 years)? Your time frame should drive the type of fund you pick. Mapping goals to amounts is easier with our financial planner.
- Pick a fund type that matches your horizon. As a rough guide: equity funds (including index funds) suit long horizons of 5+ years; hybrid funds suit medium terms; debt or liquid funds suit short goals. Avoid putting money you'll need next year into equity.
- Set the SIP amount and date. Decide your monthly contribution and a debit date that falls just after your salary credit, so the money is set aside before you spend it.
- Enable auto-debit (mandate). Approve a NACH e-mandate or UPI AutoPay so the SIP runs automatically every month without manual effort.
- Confirm and track. Your first instalment is processed on the next eligible date. After that, review your portfolio once or twice a year — not daily.
How Much Should a Beginner Invest?
You can technically start a SIP with as little as ₹100–₹500 a month, which makes it ideal for first-timers and students. But the goal isn't to start small forever — it's to start now and grow.
A widely used rule of thumb is the 50-30-20 budget: roughly 50% of income for needs, 30% for wants, and 20% toward savings and investments. Your SIP should fit within that 20% bucket.
Two beginner-friendly habits:
- Start with what you can sustain. A SIP you never pause beats a large one you cancel in three months.
- Use a step-up SIP. Increase your contribution by around 5–10% each year (or whenever you get a raise). Even small annual increases dramatically lift your final corpus, thanks to compounding.
Want to work backwards from a target — say, ₹1 crore in 20 years? The SIP calculator tells you the monthly amount required to get there.
SIP vs Other Popular Options
SIPs aren't the only place to park money. Here's how equity SIPs compare with two common alternatives, so you can see where each fits:
| Feature | Equity SIP (mutual fund) | PPF | Bank FD |
|---|---|---|---|
| Returns | Market-linked (~10–12% historical, not guaranteed) | ~7.1% p.a. (govt-set, revised quarterly) | Fixed, varies by bank/tenure |
| Risk | Moderate–high (short term), lower over long term | Very low (govt-backed) | Very low |
| Lock-in | None (open-ended funds; ELSS has 3 years) | 15 years (partial withdrawal from year 7) | As per chosen tenure |
| Tax on returns | LTCG 12.5% above ₹1.25L/yr; STCG 20% | EEE — fully tax-free | Interest fully taxable; TDS if interest > ₹50k (₹1L for seniors) |
| 80C benefit | Only via ELSS funds | Yes (within ₹1.5L) | Only 5-yr tax-saver FD |
A few points worth remembering for 2026:
- ELSS funds are equity SIPs that also qualify for Section 80C (₹1.5L limit) and carry the shortest lock-in of just 3 years among 80C options. Note that 80C deductions are available only under the old tax regime.
- The ₹1.5 lakh 80C limit is shared across PPF, ELSS, EPF, tax-saver FDs, and more. The NPS offers an additional ₹50,000 deduction under Section 80CCD(1B).
- For equity mutual funds: long-term capital gains are taxed at 12.5% on gains above ₹1.25 lakh per year; short-term gains at 20%.
- For bank FDs in FY 2025-26 onward, banks deduct TDS once your annual FD interest crosses ₹50,000 (or ₹1,00,000 for senior citizens) — thresholds raised in Budget 2025 from the earlier ₹40,000 / ₹50,000.
You can model the safer, fixed-return options too — try the PPF calculator or FD calculator to compare.
Common SIP Mistakes to Avoid
- Stopping the SIP when markets fall. This is the single biggest mistake. Falling markets are exactly when rupee-cost averaging buys you the most units. Stay invested.
- Chasing last year's top performer. Past returns don't predict future ones. Pick a fund aligned to your goal and stay consistent.
- Investing without a goal. A SIP tied to a specific target and horizon is far easier to stick with. Use the planner to set one.
- Ignoring asset allocation. Don't put short-term money into equity. Match the fund to when you need the cash.
- Stretching beyond your means. An over-ambitious SIP that you cancel does more harm than a modest one you keep for 15 years.
- Forgetting to step up. Leaving your SIP at the same amount for a decade quietly erodes your goal in real terms because of inflation.
Frequently Asked Questions
Can I stop or pause my SIP anytime? Yes. For open-ended funds, SIPs are flexible — you can pause, stop, increase, or decrease them anytime with no penalty. The exception is ELSS, where each instalment is locked in for 3 years from its date of investment, though you can still stop future contributions.
Is a SIP safe? Can I lose money? SIPs invest in market-linked mutual funds, so the value can fall in the short term and returns are not guaranteed. Equity SIPs carry higher short-term risk but have historically rewarded long horizons. If you need very low risk, options like PPF (~7.1%, EEE) or FDs may suit you better.
How much money do I need to start a SIP? You can start with as little as ₹100–₹500 per month on most platforms. Begin with an amount you can comfortably sustain and increase it over time using a step-up SIP.
SIP or lump sum — which is better? For salaried investors with monthly cash flow, a SIP is usually the simpler, lower-stress choice because it averages your cost. If you have a large amount sitting idle, a lump sum can work too — compare both outcomes with our SIP calculator and lumpsum calculator before deciding.
Starting a SIP is one of the simplest, most accessible ways for Indians to build long-term wealth in 2026. Get your KYC done, pick a fund that matches your goal, automate the debit, and — most importantly — stay consistent. Time and patience do the heavy lifting.
This article is general information, not financial advice. Mutual fund and market-linked returns are not guaranteed. Consult a SEBI-registered advisor for decisions specific to you.
