Question 1

What is SIP and how does it work?

Accepted Answer

SIP (Systematic Investment Plan) is a method of investing a fixed amount in mutual funds at regular intervals, typically monthly. It uses rupee cost averaging to reduce the impact of market volatility and helps build wealth through the power of compounding over time.

Question 2

What is the minimum amount to start a SIP?

Accepted Answer

Most mutual funds in India allow you to start a SIP with as little as Rs 500 per month. Some funds may have higher minimums of Rs 1,000 or Rs 5,000. There is no upper limit on SIP investments.

Question 3

Are SIP returns guaranteed?

Accepted Answer

No, SIP returns are not guaranteed as they are linked to market performance. The returns shown in this calculator are based on an assumed annual rate of return. Actual returns may vary. Equity mutual fund SIPs have historically delivered 12-15% annual returns over long periods, but past performance does not guarantee future results.

Question 4

What is the power of compounding in SIP?

Accepted Answer

Compounding means you earn returns not just on your invested amount but also on the accumulated returns. In SIP, each monthly installment starts compounding from its investment date. The longer you stay invested, the greater the compounding effect — which is why starting early matters.

Question 5

Is SIP better than lump sum investment?

Accepted Answer

SIP is generally better for investors who want to invest regularly from salary and reduce market timing risk. Lump sum investing can be better if you have a large amount and the market is at a relatively low point. SIP is often recommended for equity investments, while lump sum works well for debt funds.

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