SIP stands for Systematic Investment Plan. It is a method of investing in mutual funds where you invest a fixed amount of money at regular intervals, such as monthly, quarterly, or yearly. You can choose from various mutual fund schemes that suit your risk appetite, financial goals, and time horizon. SIP allows you to start investing with a small amount and gradually build a large corpus over time.
How does an SIP work?
When you start an SIP, you need to select a mutual fund scheme, an amount, and a frequency for your investment. You also need to provide your bank account details and a mandate for auto-debit. Every time you invest, you get some units of the mutual fund scheme at the prevailing net asset value (NAV).
The NAV is the price per unit of the mutual fund. As you keep investing regularly, you accumulate more units, and your investment grows. You can track the performance of your SIP online and redeem your units whenever you want, subject to the exit load and tax implications of the mutual fund scheme.